Crockett Capital Corp. v. Inland Am. Winston Hotels, Inc.

Crockett Capital Corp. v. Inland Am. Winston Hotels, Inc., 2011 NCBC 6.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE

SUPERIOR COURT DIVISION

COUNTY OF WAKE 08 CVS 0691

CROCKETT CAPITAL CORPORATION,

Plaintiff,

v.

ORDER AND OPINION

INLAND AMERICAN WINSTON HOTELS,

INC. and WINN LIMITED PARTNERSHIP,

Defendants.

{1} This matter is before the Court on cross-motions for summary judgment.

After considering the briefs submitted, other submissions of counsel, and oral

argument, the Court concludes that Plaintiff’s Motion for Summary Judgment is

GRANTED IN PART and DENIED IN PART. Defendants’ Motion for Summary

Judgment is GRANTED IN PART and DENIED IN PART.

Robinson, Bradshaw & Hinson, P.A. by John R. Wester, Louis A. Bledsoe, III,

and Richard C. Worf, Jr. for Plaintiff.

Moore & Van Allen PLLC by Scott M. Tyler and Karin M. McGinnis, and

DLA Piper US LLP by Jeffrey D. Herschman and Megan Hanley Baer for

Defendants.

Tennille, Judge.

I.

PROCEDURAL BACKGROUND

{2} This action was filed in Wake County Superior Court on January 16, 2008.

Plaintiff Crockett Capital Corporation filed the Notice of Designation

simultaneously with the Complaint on January 16, 2008. The case was designated

a mandatory complex business case by Order of the Chief Justice on January 17,

2008, and subsequently assigned to the undersigned Special Superior Court Judge

for Complex Business Cases by the Chief Special Superior Court Judge for Complex

Business Cases. Plaintiff filed an Amended Complaint on March 6, 2008.

{3} On March 13, 2009, this Court denied Defendants’ Motion to Dismiss.

{4} By order dated May 5, 2009, this action was consolidated with a related

case, Inland Am. Winston Hotels, Inc. v. Winston, No. 08 CVS 021786 (N.C. Super.

Ct., filed Dec. 12, 2008) (hereinafter “Inland v. Winston”), for discovery purposes.

{5} In this action, both Plaintiff and Defendants filed motions for summary

judgment on June 16, 2010. They each filed briefs in opposition to the motions for

summary judgment on July 19, 2010, and each filed a reply on August 2, 2010. The

Court heard oral argument on the motions for summary judgment on September 23,

2010.

II.

FACTS

A.

THE PARTIES

{6} Plaintiff Crockett Capital Corporation (“Plaintiff” or “Crockett Capital”) is

a North Carolina corporation with its principal place of business in Raleigh, North

Carolina. Plaintiff is engaged in the business of developing and managing hotel

properties. It is owned by Kenneth R. Crockett (“Crockett”) and Robert W. Winston,

III (“Winston”), both residents of Wake County.

{7} Defendant Inland American Winston Hotels, Inc. (“Inland”) is a Delaware

corporation with its principal place of business now in Oak Brook, Illinois. When

this lawsuit was filed, and during most of the events described in this Order and

Opinion, Inland’s principal place of business was in Raleigh, North Carolina.

{8} Defendant WINN Limited Partnership (“WINN”) is a North Carolina

limited partnership with its principal place of business now in Oak Brook, Illinois.

When this lawsuit was filed, and during most of the events described in this Order

and Opinion, WINN’s principal place of business was in Raleigh, North Carolina.

Defendant Inland is the general partner of WINN.

{9} Inland and WINN are engaged in the business of owning and operating

hotels and other hospitality properties.

{10} Inland and WINN will be referred to collectively as the “Defendants.”

B.

OVERVIEW

{11} Inland American Real Estate Trust, Inc. (“Inland American”) is the parent

of Inland. On July 1, 2007, a wholly-owned subsidiary of Inland American acquired

all of Winston Hotels, Inc.’s (“Winston Hotels”) capital stock and later became

Inland. At that time, Winston Hotels was a North Carolina public corporation and

the general partner of WINN. It owned and developed hotels throughout the

country, with a concentration in the southeastern United States. (Affidavit of

Kenneth R. Crockett (“Crockett Aff.”) ¶ 3.) Winston and Crockett, Plaintiff’s owners

and key executives, were key executives with Winston Hotels before the acquisition.

{12} In April 2007, Inland American entered into a contract with Winston

Hotels under which Inland American’s wholly-owned subsidiary would merge with

Winston Hotels. (Second Am. Compl. (“Compl.”) ¶ 9; Answer to Second Am. Compl.

(“Answer”) ¶ 9.)

{13} At the time of the merger, Winston Hotels had fifty (50) hotels in its

portfolio. (Crockett Aff. ¶ 3.) Additionally, several hotel development projects were

in various stages of consideration and review by Winston Hotels. (Compl. ¶ 7;

Answer ¶ 7.) As a result of the merger that created Inland, Defendants acquired

ownership of hotel properties then under construction and either ownership or an

interest in “certain other properties that may be suitable for development as hotel

projects . . . .” (Agreement Regarding Development Projects executed by Crockett

Capital, Inland, and WINN on July 30, 2007 and made effective July 1, 2007

(“Master Agreement”) at ¶ A.) The undeveloped projects consisted of thirteen (13)

identified properties, termed the “Pipeline Properties.” (Master Agreement, Ex. B.)

The Pipeline Properties include the four properties which are the subject of this

case: a Westin-branded hotel in Research Triangle Park (“RTP Westin”), a proposed

Aloft-branded hotel near RDU airport (“RDU Aloft”), a proposed Aloft-branded hotel

in Chapel Hill (“Chapel Hill Aloft”), and a proposed combination Aloft/Hilton-

branded hotel in downtown Raleigh (“Raleigh Hampton/Aloft”). (Master

Agreement, Ex. B; Pl.’s Br. in Supp. of Mot. for Summ. J. (“Pl.’s Summ. J. Br.”) 3.)

{14} Both Crockett and Winston had extensive experience in the development of

hotel properties. (Compl. ¶ 10.) They previously managed Winston Hotels, and,

therefore, they were familiar with the properties that Winston Hotels targeted for

potential development. (Compl. ¶ 10.) Many of the hotels that Winston Hotels

owned had been developed and built by Winston Hotels under the immediate

supervision of Crockett and the ultimate supervision of Winston. (Crockett Aff. ¶

3.)

{15} The task of developing hotels is a complex one. Normally, before

construction begins, a development company must obtain control of the hotel site,

procure a suitable hotel design, obtain a franchise agreement from a national

franchisor, obtain market studies to determine the feasibility of building the hotel,

secure necessary government approvals, obtain an agreement with a general

contractor, arrange financing, and procure furnishings, fixtures, and equipment,

among other things. (Compl. ¶ 12; Answer ¶ 12; Dep. of Tom McGuiness

(“McGuiness Dep.”) at 32:12−19.)

{16} Before the acquisition of Winston Hotels, neither Inland American nor its

affiliates had ever owned a hotel property or developed a hotel property. (Compl. ¶

11; Answer ¶ 11.)

C.

THE MASTER AGREEMENT

{17} In late April or May 2007, as the merger was proceeding to closing, Inland

American began negotiating with Crockett and Winston what later became the

“Agreement Regarding Development Projects” (“Master Agreement”). (Compl. ¶ 15;

Answer ¶ 15; Dep. of Thomas H. McAuley (“McAuley Dep.”) at 40:20−41:3.) The

parties initially negotiated a non-binding Memorandum of Understanding that set

out the major terms of the deal and the parties’ intentions. (McAuley Dep. at

40:20−41:3.) The Memorandum of Understanding was complete by late May 2007.

(McAuley Dep. at 92:5−14, 101:9−23.) The parties then reduced the Memorandum

of Understanding to the terms contained in the Master Agreement.

{18} The negotiations leading to the execution of the Master Agreement at

times were contentious. For example, on June 28, 2007, Crockett sent an email to

his attorney, Mr. Bunch, about the ongoing negotiations in which he stated that

Inland had not been treating him very well and was reneging on prior

commitments. (Inland v. Winston, Mem. of Law in Opp’n to the Mot. for Summ. J.

Filed by Defs. William W. Bunch, III and Brown & Bunch, PLLC (“Pl.’s Resp. Br.”),

Ex. 6: E-mail from Kenneth Crockett to William Bunch (June 28, 2007, 22:01 EDT).)

Crockett indicated that he might reassess the situation the following week. (Inland

v. Winston, Pl.’s Resp. Br., Ex. 6: E-mail from Kenneth Crockett to William Bunch

(June 28, 2007, 22:01 EDT).) After sending the June 28, 2007 email, Crockett spoke

via telephone to Inland’s Chairman, Dan Goodwin. (Dep. of Kenneth R. Crockett

(“Crockett Dep.”) at 310:23−311:9.) Crockett believed that Mr. Goodwin had

assured him that Inland intended to go forward with the Agreement. (Crockett

Dep. at 310:23−311:9.)

{19} Negotiating the Master Agreement extended beyond the close of the

merger on July 1, 2007. (Pl.’s Summ. J. Br. 2.) The Master Agreement was

executed on July 30, 2007 by Inland, WINN, and Crockett Capital and made

effective retroactively to July 1, 2007. (Pl.’s. Summ. J. Br. 1.) Crockett signed the

Master Agreement on behalf of Crockett Capital, which had been formed on July 11,

2007. Brent West, Executive Vice President and Chief Financial Officer of Inland

and WINN, signed the Master Agreement on behalf of Defendants with

authorization from his superiors. (Dep. of Michael Broadfoot (“Broadfoot Dep.”) at

45:19−21.)

{20} After the merger, Defendants engaged Crockett Capital to provide: (1)

construction management services for the hotel properties under construction; (2)

“projections needed in determining the feasibility and investment return for the

development of the Pipeline Properties;” and (3) “development, construction

management, and property management services with respect to those properties

which Inland determines to develop as hotel properties.” (Master Agreement ¶ B.)

The Master Agreement outlined the potential ownership and development of the

thirteen (13) Pipeline Properties. (Master Agreement ¶¶ C, 3.)

{21} Through the Master Agreement, Plaintiff and Defendants sought to

combine their strengths. Crockett had the development expertise, and Defendants

had access to capital to fund development. (Crockett Aff. ¶ 3; McGuiness Dep. at

39:7−10.) Crockett Capital would pursue the Pipeline Properties and give Inland an

opportunity to participate in the development of them. (Master Agreement ¶ 2.) If

Inland elected not to participate and Crockett Capital wanted to develop the

property, Inland would convey its rights in the property to Crockett Capital (or an

affiliate), and Crockett Capital would reimburse Inland for its Pursuit Costs.

Crockett Capital could then develop the property on its own or with another

investor. (Master Agreement ¶ 5.) Also, Crockett could pursue the development of

properties other than the Pipeline Properties (“New Properties”) to develop with

Inland, with a third party, or alone. (Master Agreement ¶ 6.)

{22} The Master Agreement set out a three-stage process under which Inland

would choose either to participate with Crockett Capital in developing and owning

the hotels, or decline to participate and allow Crockett Capital to develop the hotels

on its own. (Pl.’s Summ. J. Br. 3.) Pursuant to Paragraph 2 of the Master

Agreement, Crockett Capital agreed to evaluate the Pipeline Properties and to

submit to Defendants a “preliminary development package” for each of them.

(Master Agreement ¶ 2.) Within thirty (30) days of the execution of the Master

Agreement, Crockett Capital would submit to Inland a “preliminary development

package” for four (4) properties, including the Chapel Hill Aloft and the RDU Aloft.

(Master Agreement ¶ 2.) A “preliminary development package” for the remaining

nine (9) properties was due within sixty (60) days of the execution of the Master

Agreement. (Master Agreement ¶ 2.)

{23} The “preliminary development package” was to include, among other

things, a “single page investment description,” “proposed franchisors,” a

“preliminary cost budget,” “projected net operating income for the first three years

of hotel operations,” “preliminary proposed equity percentages” ranging from five (5)

to twenty (20) percent for Crockett Capital and the remainder to Inland, “projected

leverage returns to equity,” and “anticipated Pursuit Costs and a preliminary

Pursuit Schedule.” (Master Agreement ¶ 2.) Pursuit Costs and Pursuit Schedule

were defined terms in the Master Agreement. (See Master Agreement ¶ 2.)

{24} Upon receipt of a preliminary development package, Inland had ten (10)

days to provide written notice to Crockett Capital of its decision to pursue the

development of a particular Pipeline Property. (Master Agreement ¶ 2.) If Inland

elected to pursue a specific property, it would be obligated to pay its share of

approved Pursuit Costs “as such Pursuit Costs are incurred, including any such

costs already incurred by [Crockett Capital] to date.” (Master Agreement ¶ 2.)

Likewise, Crockett Capital would be required to reimburse Inland for its share of

the approved Pursuit Costs already paid by Inland, based on Crockett Capital’s

“proposed equity percentage for the joint venture ownership of the property.”

(Master Agreement ¶ 2.)

{25} If Inland chose to pursue development, Crockett Capital would produce a

second, more detailed “pre-development package” to Inland in accordance with the

Pursuit Schedule submitted with the “preliminary development package” and

approved by Inland. (Master Agreement ¶ 2.) This submission would include,

among other things, “updated proposed equity ownership percentages for the

proposed project,” “a detailed description of the investment, including conceptual

drawings or a rendering of the proposed development,” “a map showing the location

of competing hotel projects,” “a detailed estimate of development and construction

cost,” “proposed debt structure and equity contributions,” and “an updated estimate

of Pursuit Costs.” (Master Agreement ¶ 2.) Again, Defendants were required to

provide written notice within ten (10) days if they wished to continue in the

development of a particular property “based upon, among other things, the

[Crockett Capital] submissions.” (Master Agreement ¶ 2.)

{26} If Defendants elected to proceed beyond this stage, Crockett Capital would

create a third and final development package to Inland. (Master Agreement ¶ 2.)

This submission would include a “final proposed development cost estimate based

on a lump sum or guaranteed maximum price for construction from a designated

general contractor” and “environmental and marketing studies satisfactory to

Inland in its reasonable discretion.” (Master Agreement ¶ 2.) Additionally, if

requested, Crockett Capital would be required to make a telephonic presentation to

Inland’s board of directors regarding each Pipeline Property being considered.

(Master Agreement ¶ 2.)

{27} Upon submission of a final development package, if Inland elected to

continue development, the Master Agreement required Crockett Capital and Inland

(or its affiliates) to form a limited liability company to own and operate the property

as a “Joint Venture.” (Master Agreement ¶ 3.) Each Joint Venture was to be

governed by an operating agreement that was in “substantially” the same form as

the operating agreement attached to the Master Agreement as Exhibit E. (Master

Agreement ¶ 3.) Exhibit E is a detailed limited liability company agreement. It

leaves only four terms open: (1) the name of the limited liability company to be

formed, (2) the date of its creation, (3) the date the Certificate of the LLC was filed,

and (4) the capital contributions to be made by Plaintiff and Defendants. (Pl.’s

Summ. J. Br. 28.) Those items would have been set forth in the development

package agreed to by the parties.

{28} In order to comply with Internal Revenue Code Regulations with respect to

real estate investment trusts (“REITs”), Paragraph 3 of the Master Agreement

further required each Joint Venture to “lease the Pipeline Property to an operating

entity.” (Master Agreement ¶ 3.) The leases were to be “‘substantially similar’ to

the leases used by WINN . . . in other projects for purposes of compliance with REIT

regulations.” (Master Agreement ¶ 3.) An example or form lease, however, was not

included with the Master Agreement. Paragraph 3 of the Master Agreement sets a

“5-year [lease] term[] with automatic renewals” at the current market rental rate,

but it does not set a specific base rent. (Master Agreement ¶ 3.) Instead,

Paragraph 3 provides a formula for determining the base rent which includes

“property taxes, casualty insurance premiums, and a reasonable capital reserve.”

(Master Agreement ¶ 3.) The parties were to have the same ownership interest in

each lease as they had in the corresponding Joint Venture. (Compl. ¶ 16.)

{29} The parties agreed that Crockett Capital would provide construction

management and hotel management services for each Joint Venture. (Master

Agreement ¶ 4.) With respect to hotel management, the parties agreed to execute

an agreement “in substantially the form” of Exhibit D to the Master Agreement.

(Master Agreement ¶ 4(b).) Exhibit D is a detailed form hotel management

agreement. (Master Agreement, Ex. D.) Similarly, with respect to construction

management, the parties agreed to enter into an agreement “in substantially the

form” of Exhibit F to the Master Agreement. (Master Agreement ¶ 4(a).) Exhibit F

is a comprehensive form development agreement. (Master Agreement, Ex. F.)

Paragraph 4 of the Master Agreement also provided that Defendants had the right

to manage any office or retail portion of any Pipeline Property and to be

“compensated for such management services at a market rate to be determined in

accordance with the [Joint Venture] operating agreement.” (Master Agreement ¶

4.) The Court will refer to the various form agreements attached to the Master

Agreement as the “implementing” agreements.

{30} Inland’s failure to give written notice at any of the required stages would

constitute a rejection of the opportunity to develop the Pipeline Property with

Plaintiff. (Compl. ¶ 13.) Upon Defendants’ rejection of a development package,

Defendants “agree[d] to transfer, convey and assign, any rights [they] ha[ve] in any

such Pipeline Property to [Plaintiff] or its assignee, and to execute all

documentation reasonably necessary to accomplish such transfer, upon payment by

[Plaintiff] to [Defendants their] acquisition costs incurred to date for such rights.”

(Master Agreement ¶ 5.)

{31} If “at any point” Inland elected not to pursue a particular property, and if

Crockett Capital elected to develop it alone or with a third party, Crockett Capital

would be required under the Master Agreement to “reimburse Inland for those

[P]ursuit [C]osts previously paid by Inland within ten days after the closing of the

acquisition of the land or execution of the ground lease with respect to such

property and in any event not later than the commencement of the construction.”

(Master Agreement ¶ 2.) If Crockett Capital failed to reimburse Inland for its

Pursuit Costs within that ten (10) day period, the Master Agreement provided that

Crockett Capital would incur interest on that debt. Inland was obligated to transfer

its interests in the properties only “upon payment by [Crockett Capital] to Inland of

its acquisition costs incurred to date for such rights.” (Master Agreement ¶ 5.) The

Master Agreement did not permit Inland to proceed alone with a Pipeline Property

that Crockett wished to pursue. The Court will refer to the provisions governing

rejection of a Pipeline Property by Defendants as the “impasse” provisions.

{32} Inland was further protected by contract provisions, which granted it

another chance to accept a previously rejected development package if Plaintiff later

made “material changes” to the package. (Master Agreement ¶ 5.) Crockett Capital

was bound to notify Inland of any material changes in the terms of a Pipeline

Project previously rejected by Inland. Paragraph 5 of the Master Agreement

defined a material change in the terms of a Pipeline Project as:

(i) a change in the hotel brand; (ii) a change of more than 10% in the

number of rooms; (iii) a decrease of more than 7.5% of the total

development cost estimate; or (iv) an increase of more than 7.5% in the

Net Operating Income projected over the first three years of hotel

operation.

(Master Agreement ¶ 5.)

{33} The Master Agreement, together with the extensive attachments

constituting the implementing agreements, constituted a very sophisticated

business transaction among parties of equal knowledge negotiating at arms length.

As this Court noted in JDH Capital, LLC v. Flowers, 2009 NCBC 4 ¶ 18 (N.C.

Super. Ct. Mar. 13, 2009), real estate development requires sophisticated

documentation. The extensive nature of the documentation in the Master

Agreement and the implementing agreements left very few items to be negotiated

for each site. In essence, the parties established working agreements to cover each

aspect of a joint development once the decision was made to move forward with a

particular property.

{34} The major term left undecided with respect to each Pipeline Property was

the capital contributions to be made by each party. The capital contributions

dictated the ownership in each Joint Venture, and, under the Master Agreement,

the proposed equity percentages for each project would be known by the parties very

early in the process. Each project would have its own capital structure to be

negotiated among the parties. Crockett Capital was to submit its “preliminary

proposed equity percentages” for each project with the submission of the

“preliminary development packages,” which were due within either thirty (30) days

or sixty (60) days of the Master Agreement’s execution. (Master Agreement ¶ 2.) It

is possible that the percent ownership of each property could change after Crockett

Capital’s initial submission because Crockett Capital was required to update the

proposed equity ownership percentages in its subsequent development packages.

(Master Agreement ¶ 2.) Even so, the proposed equity percentages in the initial

submissions created both risks and benefits to the parties. Once Inland elected to

proceed with a project, it incurred an obligation to share the Pursuit Costs. Those

costs would be paid “as incurred . . . in accordance with the proposed ownership

percentages” then existing. (Master Agreement ¶ 2). Additionally, if both parties

elected after Inland’s initial approval to pass on a particular property, then both

parties would be responsible for their own Pursuit Costs as determined by the

proposed percent ownership in Crockett Capital’s initial submission.

{35} The Master Agreement contained no language indicating that it was

merely a letter of intent. These sophisticated parties elected not to use such

language. They had executed a prior Memorandum of Understanding, and the

Master Agreement provided the detailed final agreement.

D.

THE RTP WESTIN

{36} One of Crockett Capital’s breach of contract claims and some of

Defendants’ counterclaims relate to a transaction involving the RTP Westin, which

occurred before the parties executed the Master Agreement. The RTP Westin is one

of the thirteen Pipeline Properties listed in the Master Agreement. (Master

Agreement, Ex. B) As part of the acquisition of Winston Hotels, Inland acquired the

right to develop this property. (Master Agreement ¶ A.)

{37} Since early 2007, Crockett had been working to acquire the RTP Westin

site for Winston Hotels. (Crockett Dep. at 300:7−11.) In June 2007, Crockett was

working to finalize the purchase contract for the RTP Westin site. Gregory

Sanchez, the seller’s representative, had been in ongoing negotiations with Mr.

Crockett to finalize the deal. (Dep. of Gregory Sanchez (“Sanchez Dep.”) at

32:10−23, 33:23−34:4, 35:19−36:20.) Prior to his departure for a family vacation in

June, Crockett left a signed copy of the purchase contract for the RTP Westin site

with his secretary and instructed his attorney to release the signature page upon

confirmation that Mr. Sanchez had obtained his clients’ consent to the final terms.

(Sanchez Dep. at 38:3−39:17; Crockett Dep. at 300:1−304:2.) Crockett signed the

purchase contract in his capacity as an officer of Winston Hotels, which was the sole

general partner of Winn LP at that time. (Bunch Dep. at 82:25−83:1.) Although the

contract for the sale of the RTP Westin site had not been executed as of July 1, 2007

(the day Inland acquired all rights to Winston Hotels’ assets), drafts, all of which

named Winston Hotels or Winn LP as the purchaser, had been prepared and

circulated. (Inland v. Winston, Answer of Defs. Robert W. Winston, III, Kenneth R.

Crockett, and Winston Hospitality, Inc. (“Westin Answer”) ¶ 16; Crockett Dep. at

300:1−304:2; Bunch Dep. at 80−81.)

{38} Mr. Sanchez began putting pressure on Mr. Crockett to execute the

contract because Mr. Sanchez was under pressure to present it to the seller’s

investment committee contemporaneously with the lease for a proposed office

building that would be adjacent to the RTP Westin. (Inland v. Winston, Def.

William W. Bunch, III and Brown and Bunch, PLLC’s Br. in Supp. of Mot. for

Summ. J. (“Defs.’ Summ. J. Br.”) 5.) Mr. Sanchez gave Mr. Crockett an ultimatum:

if the contract terms could not be imminently finalized, he would take the RTP

Westin opportunity to another qualified hotel developer with whom he had a

longstanding business relationship. (Sanchez Dep. at 53:17−58:11.)

{39} With the merger between Inland and Winston Hotels concluded, neither

Crockett nor Winston was an officer or an employee of the surviving entity.

(Crockett Aff. ¶ 4; Aff. of Robert W. Winston, III (“Winston Aff.”) ¶ 4.) Neither party

had the authority to sign a contract on behalf of Winston Hotels or Inland. Yet,

Crockett’s involvement in procuring the RTP Westin project for the Joint Venture

was essential for Inland and Crockett Capital to move forward with the business

opportunity. Mr. Sanchez was under a deadline, and without Crockett’s

participation, he would have been inclined to recommend selling the property to

another developer rather than to Inland, an organization lead by unknowns.

(Sanchez Dep. at 69:25−70:17.)

{40} Crockett had the contract for the RTP Westin site put in the name of

Winston Hospitality, a Winston-Crockett entity that was not a party to the Master

Agreement. (Inland v. Winston, Defs.’ Summ. J. Br., Ex. 8: E-mail from Kenneth

Crockett to William Bunch (July 11, 2007, 14:05 EDT); Bunch Dep. at 126:7−12,

131:1−7.) Crockett sent Mr. Bunch a contract signed by Winston on behalf of

Winston Hospitality on July 12, 2007. (Bunch Dep. at 144:20−3; Tr. of Hr’g 97

(argued Sep. 23, 2010); Inland v. Winston, Compl. ¶ 21; Westin Answer ¶ 21.) It

was executed by the seller on July 19, 2007. (Inland v. Winston, Compl. ¶ 21;

Westin Answer ¶ 21.)

{41} No one from Crockett Capital contacted Inland to inquire whether Inland

was agreeable to Winston Hospitality being named the contract purchaser.

(Winston Dep. at 178:9−179:23; Crockett Dep. at 316:6−319:9.)

{42} Crockett explained the reason for the name change in a July 11, 2007

email to his attorney, which stated:

Bill: You will see that, in my discussions with Greg Sanchez, we have

changed the purchasing entity to Winston Hospitality for signature by

Bob Winston. The change is necessary to maintain momentum and

timeliness in pursuit of this transaction. Among other things, Greg

needs to present a signed contract for his investment committee

tomorrow. Bob and I fully intend to develop this property under the

terms of our joint venture arrangement being negotiated with Inland.

The assignment provisions within the purchase agreement will allow

us to form the [joint venture] with Inland without further approvals

from seller. Ken.

(Inland v. Winston, Defs.’ Summ. J. Br., Ex. 8: Email from Kenneth Crockett to

William Bunch (July 11, 2007, 14:05 EDT) (emphasis added).)

{43} Crockett also told his attorney in July 2007 that it did not matter which

entity ultimately entered into contracts and vendor relationships because he and

Winston were pursuing deals for the Joint Venture and because the Master

Agreement allowed Inland’s Pursuit Costs to be “trued up.” (Bunch Dep. at

22:20−23:6.) The goal was to get the property under contract, then proceed in

accordance with the Joint Venture. (Bunch Dep. at 110:20−5.)

{44} As set forth in the Master Agreement and acknowledged by Inland’s

representative, John Brown, Mr. Crockett was to research and evaluate the Pipeline

Properties. (Dep. of John Brown (“Brown Dep.”) at 618:14−621:11.) He was to

perform all predevelopment work with regard to the Pipeline Properties, including:

conducting market studies; evaluating sites; negotiating land contracts (including

the RTP Westin contract); and hiring vendors and lawyers. (Brown Dep. at

618−621.) He also had the authority to hire and to deal with architects and

engineers for those properties. (Brown Dep. at 619:23−620:6.)

{45} Crockett’s attorney understood that although Winston Hospitality was

named in the contract to purchase the RTP Westin, Crockett and Winston intended

to assign the contract rights to the Joint Venture with Inland and negotiated an

assignment provision permitting them to do so. (Inland v. Winston, Defs.’ Summ. J.

Br. 7, Ex. 8.) Mr. Bunch made Petula Prolix Development Company, the seller of

the RTP Westin site, aware of this intent in a letter dated September 13, 2007.

(Inland v. Winston, Defs.’ Summ. J. Br., Ex. 11.) He explained that

the proposed insured under the Title Commitment is WINN Limited

Partnership . . . (“WINN”), whose sole general partner is [Inland] . . . ,

with WINN or a joint venture entity among WINN and Purchaser[,

Winston Hospitality,] being the intended assignee of Purchaser as

contemplated by Section 19 of the Contract.

(Inland v. Winston, Defs.’ Summ. J. Br., Ex. 11.)

{46} The Master Agreement was signed on July 30, 2007 and made retroactive

to July 1, 2007. Thus, Inland ratified Crockett’s actions taken on behalf of the Joint

Venture during July 2007.

{47} Inland has produced no evidence to challenge Crockett’s stated intention

with respect to the RTP Westin.

{48} On August 21, 2007, Crockett Capital tendered to Inland a preliminary

development package for the RTP Westin. (Mem. in Supp. of Defs.’ Mot. for Summ.

J. (“Defs.’ Summ. J. Br.”), Ex. 24: Westin Hotel Investment Summary.) The

proposal did not disclose that the contract purchaser for the property had been

changed. (Winston Dep. at 195:25−196:12.) Winston stated in his deposition that

he and Crockett “didn’t believe it mattered” that the property was “parked in a

holding company . . . that would hold it until [the parties] formed the joint venture

entity.” (Winston Dep. at 195:25−196:12.) Likewise, Crockett stated in his

deposition that the identity of the contract purchaser “didn’t really matter, as long

as one of the parties could bring the title to the site, to the joint venture . . . .”

(Crockett Dep. at 177:12−17.) Neither Crockett nor Winston disclosed to Inland in

investment presentations or informal meetings that the site was under contract to

Winston Hospitality. (Crockett Dep. at 331:23−332:2, 336:14−338:12.) Crockett

Capital first informed Inland that the name of the contract purchaser had been

changed in January 2008. (Defs.’ Summ. J. Br. 10.)

{49} After Crockett Capital submitted a preliminary development package for

the site, Inland verbally approved the submission and expressed its desire to

proceed with the development. (Defs.’ Summ. J. Br. 10.) It also continued to fund

its share of the Pursuit Costs for the site. (Defs.’ Summ. J. Br. 10.) Yet, Inland

never provided written notice that it wished to continue the pursuit of the RTP

Westin site, as required under the Master Agreement. (Pl.’s Summ. J. Br. 10.)

{50} Nearly three months after Crockett Capital submitted its “preliminary

development” package for the RDU Aloft, on November 13, 2007, Crockett wrote to

Inland by fax, email, and U.S. mail and requested Inland’s position on the RTP

Westin and other properties. (Crockett Aff. ¶ 16.) The next day, Mr. Brown from

Inland telephoned Crockett to advise him that Inland would not permit Crockett

Capital to manage either the RDU Aloft or the RTP Westin site. (Crockett Aff. ¶

17.) He also indicated that Inland would not execute the operating agreement for

the RDU Aloft or give him Inland’s answers for the other three projects unless

Crockett Capital gave up its right to manage the RDU Aloft and the RTP Westin.

(Pl.’s Summ. J. Br. 10.)

{51} On November 21, 2007, Crockett asserted by letter that Crockett Capital

no longer had an obligation to pursue the RTP Westin project with Inland, but that

it would continue to follow the provisions of the Master Agreement. (Letter from

Kenneth Crockett to John Brown (Nov. 21, 2007).) On December 11, 2007, Crockett

wrote to Inland asking it to transfer its right, title, and interest in the RTP Westin

site (among others) and to submit its Pursuit Costs. (Crockett Aff. ¶ 19.) Crockett

Capital then offered to pay those Pursuit Costs. (Crockett Aff. ¶ 19.) Inland never

conveyed its rights to the RTP Westin. (Pl.’s Summ. J. Br. 11.)

{52} Crockett Capital brought suit against Inland for breach of contract in

January 2008. That same month, it informed Inland that the name of the contract

purchaser for the RTP Westin was Winston Hospitality. (Defs.’ Summ. J. Br. 10.)

On Februaury 18, 2008, Crockett Capital submitted a second package for the RTP

Westin, pursuant to its obligation under the Master Agreement to resubmit a

project in the event of a material change in the terms previously rejected by Inland.

(Pl.’s Summ. J. Br. 11.) Inland responded in writing that it wished to continue the

potential development of the site, but it also indicated in those responses that it did

not consider the Master Agreement to be a binding contract. (E-mail from John

Brown to Kenneth Crockett (Feb. 28, 2008); Letter from John Brown to Kenneth

Crockett (Mar. 3, 2008); Letter from Tom McGuiness to Kenneth Crockett (Mar. 20,

2008).)

{53} Ultimately, however, the RTP Westin site never was assigned to Inland.

Instead, it was sold to a third party. (Pl.’s Opp’n to Defs.’ Mot. for Summ. J. (“Pl.’s

Resp. Br.”) 11.)

{54} Crockett Capital has not reimbursed Inland for its pursuit costs incurred

in connection with the RTP Westin site. (Defs.’ Summ. J. Br. 12.)

{55} Inland claims that Crockett improperly authorized Winston Hospitality to

be named the purchaser in the contract for the RTP Westin site rather than an

entity controlled by Inland. (Pl.’s Resp. Br. 1.)

E.

INITIAL PERFORMANCE UNDER THE MASTER AGREEMENT

{56} After Crockett Capital was formed on July 11, 2007, it hired employees,

leased office space, bought computers and equipment, and retained professionals.

(Crockett Aff. ¶ 8.)

{57} On July 12, 2007, Plaintiff presented a preliminary development package

to Defendants for the Chapel Hill Aloft, one of the Pipeline Properties. (Pl.’s Summ

J. Br. 6; Master Agreement, Ex. B.) On or about July 25, 2007, Defendants

provided written notice of their desire to proceed toward the development of the

Chapel Hill Aloft. (Compl. ¶ 43; Answer ¶ 43.)

{58} Crockett Capital submitted preliminary development packages for eight of

the thirteen Pipeline Properties. (Defs.’ Summ. J. Br. 6.) Three of the proposals

were submitted within the time frame contemplated by the Master Agreement.

(Defs.’ Summ. J. Br. 6.)

{59} Crockett proposed treating Crockett Capital’s first development package

for the RDU Aloft and a proposed Aloft in Birmingham, Alabama, as the final, stage

three proposal. (Crockett Aff. ¶ 12.) Despite Defendants having problems with the

compressed timeline for these developments (Broadfoot Dep. at 311:19−314:7), the

board of directors of Inland American approved the budget for the RDU Aloft

proposal during a telephonic meeting on September 12, 2007. (Mins. of the Meeting

of the Board of Directors of Inland American at 5.) On September 18, 2007,

Defendants determined to participate in the Birmingham Aloft project. The parties

agreed that Defendants would own a ninety-five (95) percent equity interest and

Plaintiff would own a five (5) percent equity interest in both properties. (Compl. ¶

49.) With respect to the Birmingham Aloft, Plaintiff and Defendants executed all

the documents as required by the Master Agreement. (Compl. ¶ 49.) The parties

used the Birmingham Aloft documents as a model for the RDU Aloft documents.

(Compl. ¶ 50.)

{60} On or about September 28, 2007, in accordance with the Master

Agreement, Plaintiff presented Defendants with a second development package for

the Chapel Hill Aloft. (Compl. ¶ 43.) After this submission, Defendants did not

provide notice that they wished to proceed further with development of the Chapel

Hill Aloft. (Pl.’s Summ. J. Br. 34.) Plaintiff attempted to enforce Paragraph 5 of the

Master Agreement, but Inland never conveyed its rights in the property or gave

Plaintiff any assurances that it would abide by the Master Agreement. (Pl.’s

Summ. J. Br. 34.) Instead, Defendants claimed the Master Agreement was

unenforceable. (Pl.’s Summ. J. Br. 34.)

{61} Similarly, Plaintiff submitted a “preliminary development” package for a

Hampton Inn & Suites/Aloft Hotel in Raleigh, North Carolina (the “Raleigh

Hampton/Aloft”). (Compl. ¶ 45.) After receipt of the “preliminary development”

package, Defendants failed to provide written notice that they wished to proceed

with development of the Raleigh Hampton/Aloft. (Pl.’s Summ. J. Br. 34.) Plaintiff

attempted to enforce Paragraph 5 of the Master Agreement, but Defendants never

conveyed their rights in the property or gave Plaintiff any assurances that they

would abide by the Master Agreement. (Pl.’s Summ. J. Br. 34.) Again, Defendants

claimed the Master Agreement was unenforceable. (Pl.’s Summ. J. Br. 34.)

F.

RDU ALOFT

{62} Winston Hotels purchased the site for the RDU Aloft in 2006. (Pl.’s Summ.

J. Br. 7.) The hotel to be built on that site would be adjacent to an existing Winston

Hotels Property, a Hilton Garden Inn. (Pl.’s Summ. J. Br. 7.) It was apparent to

Crockett before the merger with Inland that the RDU Aloft would need more

parking than its lot could accommodate. (Crockett Aff. ¶ 30.) He proposed

obtaining the necessary parking from the Hilton Garden Inn. He commissioned a

study that concluded the parking rearrangement would pose no problem for the

Hilton Garden Inn because it did not need the spaces that would be reallocated to

the RDU Aloft. (Crockett Aff. ¶ 30.)

{63} In February 2007, Winston Hotels submitted to the Town of Cary a Site

Plan Application and Major Site Plan Submittal that would have adjusted the

property line between the two properties. (Crockett Aff. ¶ 32.) Later, Winston

Hotels submitted a Site Plan that included an easement for the benefit of the RDU

Aloft. (Crockett Aff. ¶ 32.) The Town of Cary approved the latter submittal in June

2007. (Crockett Aff. ¶ 32.)

{64} When the merger with Inland was complete on July 1, 2007, Inland or an

affiliate succeeded to the ownership of the land that was burdened by the proposed

easement, and, at that time, Defendants had access to Winston Hotels’ documents

describing the need for an easement to develop the RDU Aloft property. (Brown

Dep. at 508:2−514:5.) Yet, during the merger talks and the negotiation of the

Master Agreement, no one from Crockett Capital specifically told Inland of the need

for an easement to develop the property.

{65} Crockett Capital submitted a development package to Inland for the RDU

Aloft on August 10, 2007. (Defs.’ Summ. J. Br. 12.) Crockett requested that this

initial submission be treated as a final submission to Inland, and Inland acquiesced.

(Crockett Dep. at 232:4−7.) As a final submission, the package was to contain all

necessary information Inland would need to determine whether to proceed with the

project. Winston stated that when making investment presentations to Inland, he

and Crockett “strive to present all of the factors that we know . . . to have an impact

on the development of whether to develop the hotel.” (Winston Dep. at 82:13−17.)

He said:

We presented to the best of our ability what we believe to be the facts

relevant to that investment, just as we had done for the last 13 years

for our board at Winston Hotels. We did this no differently. This was

the same type of institutional presentation that we had relied on for

our whole careers and that Winston Hotels is basically built on.

(Winston Dep. at 83:9−15.)

{66} Yet, the package Crockett Capital submitted to Inland did not identify the

easement. (Pl.’s Summ. J. Br. 8.) “Crockett did not view the easement as an

important fact to include in the investment package” because although the

easement was a “piece in the development scheme,” he believed “it would be a

benefit to the Hilton, not a burden.” (Pl.’s Summ. J. Br. 8.)

{67} When Inland’s board conditionally authorized management to complete the

RDU Aloft transaction, the directors understood that they were approving the

budget for the project and not for the Joint Venture itself. (Mins. of the Meeting of

the Bd. of Dir., Sept. 12, 2007 at 5.) The board would address the entire Joint

Venture at a subsequent meeting. (Mins. of the Meeting of the Bd. of Dir., Sept. 12,

2007 at 5.) The board resolved that:

subject to the Company entering into a definitive joint venture

agreement by and between [Inland American] . . . and [Crockett

Capital] on terms and conditions acceptable to the board in its sole

discretion, the executive officers of the Company, or any of their

designees, each of whom may act without joinder of any of the others,

be and hereby are authorized to cause the Company to approve the

development budget for the RDU aLoft [sic] Hotel which contemplates

the joint venture funding a total development budget of approximately

$21 million . . . .

(Mins. of the Meeting of the Bd. of Dir., Sept. 12, 2007 at 5.)

{68} In order to move forward with development, it became necessary to make a

formal conveyance of the easement from the Hilton Garden Inn to the RDU Aloft.

In October 2007 Crockett broached the subject with Mr. Brown, an Inland

executive. (Pl.’s Summ. J. Br. 8; Defs.’ Summ. J. Br. 12.)

{69} After that disclosure, Inland viewed the easement as a detriment to its

investment in the Hilton Garden Inn, and it never agreed to grant it to the RDU

Aloft property. (Defs.’ Summ. J. Br. 13−14.) After Inland learned of the need for

the easement to develop the RDU Aloft property, negotiations between the parties

concerning the Joint Venture for the project broke down. (Defs.’ Summ. J. Br.

13−14.)

G.

BRENT WEST

{70} At the time of the merger, Winston and Crockett entered into a non-

compete agreement in which they agreed, inter alia, not to directly or indirectly

“solicit, recruit, or induce for employment (or assist or encourage any other person

or entity to solicit, recruit, or induce for employment)” any employee of Winston

Hotels to work for Winston and Crockett or to terminate their employment with

Winston Hotels’ successor. (Defs.’ Summ. J. Br., Ex. 37, 38: Winston and Crockett

Agreement Not to Compete ¶ 1(b).) The agreements provided an exception if

Winston and Crockett obtained Inland’s express written consent. (Defs.’ Summ. J.

Br., Ex. 37, 38: Winston and Crockett Agreement Not to Compete ¶ 2.)

{71} For a number of years before the merger, Mr. West was the Chief

Accounting Officer at Winston Hotels under Crockett and Winston. (Counterclaim

¶ 6; Reply to Counterclaim¶ 6.) After the merger, Mr. West continued in the employ

of Inland as its Chief Financial Officer and its senior officer in North Carolina.

(Defs.’ Summ. J. Br. 15.)

{72} In mid to late August 2007, Mr. West and Winston had a conversations

about Winston hiring him back. (Aff. of Brent West (“West Aff.”) ¶¶ 9, 10, 14, 16.)

On August 29, 2007, Mr. West resigned his employment with Inland. (West Aff. ¶

11.) He worked a two-week notice until September 14, 2007. (Defs.’ Summ. J. Br.

16; Counterclaim ¶ 6; Reply to Counterclaim¶ 6.) Having previously accepted an

offer to do so, Mr. West joined his former superiors and became the Chief Financial

Officer at Crockett Capital and Winston Hospitality. (Counterclaim ¶ 6; Reply to

Counterclaim¶ 6.) He began work for Crockett Capital and Winston Hospitality on

September 17, 2007. (West Aff. ¶ 21.)

{73} Neither Mr. Winston nor Mr. Crockett obtained written consent from

Inland to hire Mr. West.

{74} Inland American filed suit in Wake County Superior Court against

Winston and Crockett alleging a violation of their respective non-compete

agreements relating to Mr. West’s hiring. (Defs.’ Summ. J. Br. 16.; See No. 08-CVS-

003995 (N.C. Super. Ct.) The parties filed cross-motions for summary judgment.

The Honorable Donald Stephens entered an Order on February 1, 2010, granting

Winston and Crockett’s summary judgment motion and denying Inland American’s

motion. The case is currently on appeal.

H.

CLAIMS

{75} Crockett Capital seeks partial summary judgment on its breach of contract

claims and summary judgment on all Counts of Inland’s counterclaim. (Pl.’s Mot.

for Summ. J. 1−2.) It also seeks an award of attorney fees based on Defendants’

unfair and deceptive trade practices claim. In its counterclaim, Inland seeks: a

declaratory judgment that the Master Agreement is not a binding contract, an

alternative claim for rescission of the Master Agreement based on actual or

constructive fraud in the inducement, an alternative claim for unfair and deceptive

trade practices under N.C. Gen. Stat. § 75-1.1, an alternative claim for a declaratory

judgment that Crockett Capital materially breached the Master Agreement, an

alternative claim for rescission of the RDU Aloft approval based on actual or

constructive fraud, negligent misrepresentation with respect to the RDU Aloft,

interference with prospective economic advantage, breach of contract with respect

to the Pursuit Costs for the RTP Westin and unjust enrichment with respect to the

Pursuit Costs for the RTP Westin.

{76} Defendants Inland and Winn Limited Partnership seek summary

judgment on all claims asserted by Plaintiff in its Second Amended Complaint:

breach of contract relating to the RDU Aloft property; breach of contract relating to

the RTP Westin, Raleigh Hampton/Aloft and Chapel Hill Aloft Properties; and

violation of the North Carolina Unfair and Deceptive Trade Practices Act. (Defs.’

Mot. for Summ. J. 2.) Additionally, Defendants seek summary judgment on their

counterclaims concerning the RTP Westin and the RDU Aloft. (See Defs.’ Mem. of

Law in Opp’n to Mot. for Summ. J. Filed by Plaintiff Crockett Capital Corp. (“Defs.’

Resp. Br.”) 2−19.)

III.

LEGAL STANDARD

{77} Summary Judgment is appropriate “if the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that any party is entitled

to a judgment as a matter of law.” N.C. R. Civ. P. 56(c). The burden of showing a

lack of triable issues of fact falls upon the moving party. See e.g. Pembee Mfg.

Corp. v. Cape Fear Constr. Co., 313 N.C. 488, 491, 329 S.E.2d 350, 353 (1985).

The party moving for summary judgment bears the burden of

establishing that there is no triable issue of material fact. This burden

may be met by proving that an essential element of the opposing

party's claim is nonexistent, or by showing through discovery that the

opposing party cannot produce evidence to support an essential

element of his claim or cannot surmount an affirmative defense which

would bar the claim. Once the moving party satisfies these tests, the

burden shifts to the nonmoving party to produce a forecast of evidence

demonstrating that the [nonmoving party] will be able to make out at

least a prima facie case at trial. The trial judge must consider all the

presented evidence in a light most favorable to the nonmoving party,

and all inferences of fact must be drawn against the movant and in

favor of the nonmovant[.] In addition, because summary judgment is a

somewhat drastic remedy, it must be used with due regard to its

purposes and a cautious observance of its requirements in order that

no person shall be deprived of a trial on a genuine disputed factual

issue.

DeWitt v. Eveready Battery Co., 355 N.C. 672, 681−82, 565 S.E.2d 140, 146 (2002)

(internal quotations and citations removed.) The party opposing the motion “must

come forward with specific facts (not mere allegations or speculation) that

controvert the facts set forth in the movant’s evidentiary forecast.” Johnson v.

Scott, 137 N.C. App. 534, 537, 528 S.E.2d 402, 404 (2000).

IV.

ANALYSIS

A.

THE MASTER AGREEMENT

{78} In this Court’s previous Order Denying Inland’s Motion to Dismiss and in

a case decided the same day at the summary judgment phase, this Court set forth

criteria for determining the enforceability of contracts that contemplate future

agreements. See Crockett Capital Corp. v. Inland Am. Winston Hotels, Inc. 2009

NCBC 5 (N.C. Super. Ct. Mar. 13, 2009); JDH Capital, 2009 NCBC 4. In those

opinions, the Court considered the following: (1) whether the language of the

document states that it is non-binding or otherwise demonstrates an intent not to

be bound; (2) whether the document omits material terms still to be negotiated; (3)

whether a certain remedy applies in the event the negotiation fails, even if there are

material terms to be negotiated; (4) whether the parties are sophisticated; (5) and

whether the conduct of the parties before and after the execution of the document

indicates that it is binding. See Crockett Capital, 2009 NCBC 5, ¶¶ 28−34.; JDH

Capital, 2009 NCBC 4, ¶¶ 26−41.

{79} Unsurprisingly, the parties in this action have taken two divergent views

concerning the proper interpretation and enforcement of the Master Agreement.

(Cf. Defs.’ Resp. Br. 4−8 with Pl.’s Summ. J. Br. 29−34.) It is undisputed that the

language of the Master Agreement does not state or suggest that it is non-binding.

In fact, the negotiation and execution of the Master Agreement followed the parties’

negotiation of a non-binding Memorandum of Understanding that set out the major

terms of the deal and the parties’ intentions. (McAuley Dep. at 40:20−41:3.) Had

the parties wished to indicate the non-binding nature of the Master Agreement,

they would have done so.

{80} Defendants argue that the Master Agreement leaves material terms open

for future agreement, provides no remedy should certain circumstances arise in

negotiating future agreements, and provides no means to settle unresolved disputes

concerning certain terms of the agreement. (Defs.’ Resp. Br. 4−6 (citing Boyce v.

McMahan, 285 N.C. 730, 734, 208 S.E.2d 692, 695 (1974); Housing, Inc. v. Weaver,

305 N.C. 428, 290 S.E.2d 642 (1982); Durham Coca-Cola Bottling Co. v. Coca-Cola

Bottling Co. Consol., 2003 NCBC 3 (N.C. Super. Ct. Apr. 28, 2003).) Plaintiff argues

that the Master Agreement is itself an enforceable contract. (Pl.’s Summ. J. Br.

26−32.)

{81} North Carolina courts have been reluctant to enforce contracts that

require the Court to supply material terms not specified in the parties’ agreement.

See Chappell v. Roth, 353 N.C. 690, 692, 548 S.E.2d 499, 500 (2001) (finding that a

document that merely expresses the intent and desires of the parties, rather than

their agreement, and which leaves no means to settle the unresolved terms, is not

enforceable as a contract); Housing, Inc. v. Weaver, 305 N.C. 428, 444, 290 S.E.2d

642, 652 (1982) (finding that a document, which failed to specify the form of

ownership of the subject project, was not enforceable); Boyce v. McMahan, 285 N.C.

730, 734, 208 S.E.2d 692, 695 (1974) (“‘If any portion of the proposed terms is not

settled, or no mode agreed on by which they may be settled, there is no agreement.’”

(quoting Croom v. Goldsboro Lumber Co., 182 N.C. 217, 220, 108 S.E. 735, 737

(1921))); N.C. Nat’l Bank v. Wallens, 26 N.C. App. 580, 584, 217 S.E.2d 12, 15

(1975) (“Generally, a contract, or an offer to contract, which leaves material portions

open for future negotiations is nugatory and void for indefiniteness.” (citing Boyce v.

McMahan, 22 N.C. App. 254, 206 S.E.2d 496, aff’d, 285 N.C. 730, 208 S.E.2d 692

(1974))). The North Carolina Supreme Court stated in Boyce that a contract to

enter into a future contract must specify all its material terms and essential terms,

and leave none to be agreed upon as a result of future negotiations.” 285 N.C. at

734, 208 S.E.2d at 695. In JDH Capital, this Court declined to find an enforceable

agreement. At the summary judgment stage, the Court could determine that the

relief sought could not be obtained without the Court having to supply material

terms. See 2009 NCBC 4 ¶¶ 28–37.

{82} Yet, North Carolina courts do enforce preliminary binding agreements

where some material terms setting the ultimate relationship between the parties

are left to be negotiated. In a recent case, the Court of Appeals affirmed the trial

court’s enforcement of a forum selection clause in a Master Agreement. See Sony

Ericsson Mobile Commc’n USA, Inc. v. Agere Sys., Inc., 195 N.C. App. 577, 672

S.E.2d 763 (2009). In Sony Ericsson, the parties incorporated a forum selection

provision in a Master Agreement (the “MDLA”) which contemplated that the parties

would enter into future agreements to be governed by a Statement of Work (the

“SOW”). Id. at 578, 672 S.E.2d at 765. The Court of Appeals stated:

The MDLA sets out the ground rules for the parties to negotiate

possible SOWs and articulates agreed-upon procedures, practices, and

terms applicable to SOWs the parties might execute in the future. As

the trial court stated in its order, “the main purpose of the MDLA is to

provide ‘the general terms and conditions under which’ the parties

would explore a further relationship . . . the MDLA does not require

that a Statement of Work ever be executed.”

Plaintiff argues that the MDLA contains numerous material

terms that are not resolved, and thus does not represent an enforceable

agreement. However, Plaintiff does not cite provisions or terms of the

MDLA itself, but only terms of possible SOWs. Plaintiff fails to

articulate how open terms in a hypothetical future SOW would make

the terms of the MDLA itself unenforceable. We again quote from the

trial court’s order:

“Though the MDLA may not contain many of the substantive

terms of the contemplated ultimate relationship of the parties itself—

which appears to be the provision of technological deliverables—none

of its own terms remain to be negotiated. . . .

[T]he majority of the MDLA’s provisions pertain directly to

Statements of Work, should any have been entered. Sony USA argues

that this demonstrates that the MDLA’s effect depends on a Statement

of Work. However, such dormant provisions neither demonstrate a

lack of assent to the MDLA’s terms nor otherwise provide grounds

upon which to negate those provisions of the MDLA that do not pertain

directly to Statements of Work, such as the Forum Selection Clause[.]”

Id. at 581−82, 672 S.E.2d at 767.

{83} This case is similar to Sony Ericsson. The Master Agreement and the form

implementation agreements attached thereto as exhibits were thoroughly

negotiated by the parties, and they were comprehensive. The provisions in Exhibit

E were complex and were drafted to comply with relevant tax laws and REIT

regulations. The only four items left to decide once the parties agreed to pursue a

property together were: (1) the name of the LLC, (2) the effective date of the

agreement, (3) the date the Certificate of the LLC was filed, and (4) each party’s

percentage interest. Each party’s ownership interest in each property was the only

material item to decide. Under the Master Agreement, this percentage would be set

after Crockett Capital’s first submission to Inland, though the relative interests

could be changed with subsequent submissions. Once Inland made a final decision

to accept the terms in Crockett Capital’s final package, it was bound to execute an

operating agreement in substantially the same form as Exhibit E to the Master

Agreement.

{84} Through the impasse provisions contained in Paragraph 5, the Master

Agreement contemplated and specified certain remedies should Inland choose not to

proceed with Crockett Capital on a property. Inland would be protected by: (1)

reimbursement for its costs of acquisition, and (2) a second chance to reconsider

participation if material terms of the proposed project were to change. Unlike in

JDH Capital, where the Court was asked to supply terms missing from a written

letter of intent, this case involves the enforcement of specific remedies provided for

in the agreement itself. The impasse provisions apply when the parties are unable

to agree on the narrow range of issues left open with respect to each Pipeline

Property. Absent the impasse provisions in this agreement, the lack of agreement

on such key terms as capital contribution would pose a significant barrier to judicial

enforcement.

{85} The Master Agreement recognized that Inland might choose not to

participate in a Joint Venture for a particular Pipeline Property. That choice was a

recognized component of the contract. Inland could have contracted to keep its

options on the Pipeline Property and reimburse Crockett Capital for its

development costs. It did just the opposite. Inland protected itself by providing for

receipt of any acquisition costs of the option on the Pipeline Property, as well as any

project development costs it had incurred. Inland was also protected against

Crockett Capital changing the development plan for the project in a material way

without Inland having the opportunity to revisit its decision not to participate. The

Court finds that the impasse provisions are complete and do not require

supplementation. The Court does not need to supply any material terms to enforce

the parties’ intentions.

{86} Additionally, the Court of Appeals noted in Sony Ericsson that the parties

were sophisticated businesses who could have provided in the Master Agreement

that enforcement of the forum selection clause could only occur if a SOW was

executed. Id. at 583, 672 S.E.2d at 687. The sophisticated parties to this Master

Agreement could have placed limitations on the impasse provisions, but they did

not do so. These were sophisticated parties drafting sophisticated documents. They

did not use language indicating the absence of material agreements in the Master

Agreement.

{87} Finally, the actions of the parties both before and after they executed the

Master Agreement demonstrate that the document is enforceable. The parties

began their Joint Venture by negotiating a non-binding five-page Memorandum of

Understanding that was completed no later than June 7, 2007. (Pl.’s Summ. J. Br.

30.) They then spent more than six weeks converting their understanding into the

specific provisions of the Master Agreement and its exhibits, a 156-page document.

(Pl.’s Summ. J. Br. 30.) The exhibits contained the fees for developing and

managing the hotels and a complex formula for distributing the profits of each Joint

Venture, which was “heavily negotiated.” (Pl.’s Summ. J. Br. 30.) Mr. McGuiness

and Mr. Broadfoot, Inland executives, agreed that by July 30, 2007, the “relevant

business points of the deal, many of which were contained in the exhibits, were

baked, done, negotiated.” (Pl.’s Summ. J. Br. 30 (internal quotations removed).)

{88} After the parties executed the Master Agreement, Inland acted as if the

document controlled its rights and duties with respect to the Birmingham Aloft and

the RDU Aloft. When Inland accepted Crockett Capital’s proposal for the

Birmingham Aloft, it selected an ownership interest consistent with the terms of

the Master Agreement, and it executed agreements identical in all material respects

to the implementation provisions in the Master Agreement. (McGuiness Dep.

64:13−65:7.) When Inland approved the RDU Aloft project, Mr. Broadfoot

instructed counsel for the Joint Venture to draw up documents using the

Birmingham forms. (E-mail from Michael Broadfoot to Andy Tapscott (Sept. 26,

2007, 12:22 p.m.).)

{89} Inland first indicated its concerns about the enforceability of the Master

Agreement in December 2007, nearly five months after the execution of the

agreement, and after it had operated under the provisions of the agreement and the

implementation provisions.

{90} The Master Agreement is an enforceable contract. Each party had a duty

to act in good faith and deal fairly with the other. There is evidence of record, if

believed by a jury, that would indicate Defendants failed to comply with that

obligation. Crockett Capital’s Motion for Summary Judgment on Defendants’

counterclaim Count I: Declaratory Judgment on the Enforceability of the Master

Agreement is hereby GRANTED.

B.

CLAIMS RELATED TO THE RTP WESTIN

1.

Inland’s Alleged Breach of the Master Agreement

With Respect to the RTP Westin

{91} Crockett Capital alleges that Inland breached the Master Agreement with

respect to the RTP Westin by failing to transfer its right, title, and interest in the

property after it failed to provide Crockett Capital with written notice of its

intention to develop the property in a Joint Venture within the required ten (10)

day time period, and it seeks summary judgment on that claim. (Pl.’s Summ. J. Br.

34.) Inland also seeks summary judgment on the claim. (Defs.’ Summ. J. Br.

22−25.)

{92} Crockett Capital submitted its only package for the RTP Westin in August

2007. (Pl.’s Summ. J. Br. 34.) If Inland wished to proceed in a Joint Venture, it was

required to respond in writing within (10) ten days. Inland did not so respond.

(Pl.’s Summ. J. Br. 34.) Instead, on November 14, 2007, Mr. Brown advised

Crockett that Inland would not indicate whether it would proceed with a Joint

Venture unless Crockett Capital agreed to give up its right to manage the hotel.

{93} The Master Agreement states that if Inland determines not to develop a

Pipeline Property in a Joint Venture with Crockett Capital, it

agrees to transfer, convey, and assign, any rights it has in any such

Pipeline Property to [Crockett Capital] or its assignee, and to execute

all documentation reasonably necessary to accomplish such transfer,

upon payment by Crockett Capital to Inland of its acquisition costs

incurred to date for such rights.

(Master Agreement ¶ 5.) On December 11, 2007, Crockett Capital requested that

Inland convey its rights in the property, and it offered to pay the Pursuit Costs

Inland incurred for the property. (Pl.’s Summ. J. Br. 34.) Crockett stated that it

would reimburse Inland’s Pursuit Costs incurred to date on the project “upon

commencement of construction.” (Memorandum from Kenneth Crockett to Inland

(Dec. 11, 2007) at 3.) Under Paragraph 2 of the Master Agreement, Crockett

Capital may have the right to delay payment until the commencement of

construction. Even if it does, however, Inland has no duty to transfer its rights

until Crockett Capital first pays Inland its Pursuit Costs. Because Crockett Capital

has not tendered to Inland its Pursuit Costs with respect to the RTP Westin as

required under the Master Agreement, Inland’s duty to transfer its rights in the

property has not yet arisen. See Winders v. Kenan, 161 N.C. 628, 689−90 (1913).

{94} Additionally, in order for Crockett Capital to prevail on a claim for breach

of contract, it “must show that the alleged breach caused him injury.” Ausley v.

Bishop, 133 N.C. App. 210, 219, 515 S.E.2d 72, 79 (1999). As discussed above,

Winston Hospitality was the contract purchaser for the RTP Westin. So, Crockett

and Winston already owned the property. Crockett stated that Crockett Capital

“needed [Inland] to assign . . . the rights they had in the design of the project, the

rights they had to governmental approvals and entitlements to the project” and the

franchise license for the project. (Crockett Dep. at 64:17−25.)

{95} In his deposition, Crockett acknowledged that the RTP Westin

development proceeded without the assignment of Inland’s interests in the

property. Crockett testified that Crockett Capital continued to use the design work

and the civil engineering work for the project with potential investors, and that no

investors refused to participate in the project even though Inland failed to assign

the franchise right. (Crockett Dep. at 69:14−73:14, 77:22−79:8.) Also, Crockett

could not recall any governmental approvals that needed to be assigned. (Crockett

Dep. at 72:15−76:8.) Crockett Capital and/or Winston Hospitality obtained a

franchise approval from Starwood for the RTP Westin in early 2008. (Crockett

Dep., May 17, 2010, at 17:7−18:2.) Finally, according to Winston, by the late

summer or early fall of 2008, Crockett Capital and/or Winston Hospitality had

obtained the debt and equity commitments necessary to proceed with the

construction of the RTP Westin. (Winston Dep. at 224:19−225:22.) Yet they chose

not to proceed with the development at that time. Winston stated that in October

2008, there was “uncertainty in the market. We felt like it was better to wait and

that’s what we’ve done.” (Winston Dep. at 224:19−225:22.) Winston Hospitality

now has an agreement with a Quintiles affiliate to be their development partner for

the RTP Westin site. (Winston Dep. at 224:19−225:22.)

{96} Crockett Capital and/or Winston Hospitality proceeded to develop the RTP

Westin property as though they already had all necessary rights from Inland as

required under the Master Agreement. The Crockett/Winston entities elected not to

proceed with the project because the market conditions disfavored the development

of a new hotel. Crockett Capital has projected no evidence that Inland’s alleged

breach with respect to the RTP Westin actually caused it any damages.

{97} To date, Crockett Capital has not paid Inland the Pursuit Costs incurred

with respect to the RTP Westin, and it has failed to forecast evidence of damages

caused by Inland’s failure to transfer its remaining rights in the RTP Westin

property. Thus, Crockett Capital’s Motion for Summary Judgment on its Second

Claim for Relief for Breach of Contract Relating to the RTP Westin is hereby

DENIED. Defendants’ Motion for Summary Judgment on Crockett Capital’s

Second Claim for Relief for Breach of Contract Relating to the RTP Westin is hereby

GRANTED.

2.

Crockett Capital’s Alleged Fraudulent Inducement

With Respect to the RTP Westin

{98} Inland claims that even if the Master Agreement is an enforceable

contract, it is entitled to rescind the agreement and/or is relieved from its duty to

perform under it because Crockett Capital fraudulently induced Inland into

entering into the Master Agreement by its actions related to the RTP Westin, the

RDU Aloft, and the hiring of Brent West. (Counterclaim ¶ 53.) In this section, the

Court will cover the facts surrounding the RTP Westin. 1

{99} Crockett Capital seeks summary judgment on Inland’s counterclaim for

fraudulent inducement based on actual and constructive fraud. “In order to obtain

relief from a contract on the ground of [actual] fraud, the moving party must show

false representation of a past or subsisting material fact, made with fraudulent

intent and with knowledge of its falsity, which representation was relied upon when

the party executed the instrument.” In re Estate of Loftin, 285 N.C. 717, 722, 208

S.E.2d 670, 674 (1974). “To withstand a motion for summary judgment on a fraud

claim, the forecast of the evidence must present a genuine issue of material fact as

to each element of fraud. Summary judgment is proper where the forecast of

1 For a discussion on the fraudulent inducement claim related to the RDU Aloft, see Sec. IV(C)(2),

infra. For a discussion on the fraudulent inducement claim related to the hiring of Brent West, see

Sec. IV(D), infra.

evidence shows that even one of the essential elements of fraud is missing.” Bolton

Corp. v. T.A. Loving Co., 94 N.C. App. 392, 409, 380 S.E.2d 796, 807 (1989) (internal

citations and quotations omitted). Here, Inland fails to forecast evidence of two

essential elements.

{100} While in most transactions involving real property the name of the

contract purchaser is a material fact for the purposes of an actual fraud claim, here,

as between Inland and Crockett Capital, the name of the purchaser of the RTP

Westin was not material. By having the purchase contract for the RTP Westin put

in the name of Winston Hospitality, Crockett preserved the opportunity for Inland

and Crockett Capital to develop the project together. Though the Master

Agreement had not yet been executed, Crockett was acting for the Joint Venture as

if it had been. Making the Master Agreement retroactive to July 1, 2007 ratified

Crockett’s conduct on behalf of the Joint Venture to be formed to develop the

project.

{101} In July 2007, a Winston/Crockett entity had control of the site. If Inland

chose to participate in the project, it would have a duty to proceed under the Master

Agreement. If it chose not to proceed, it would have the obligation to convey any of

its rights that it had in the property. Had Inland or WINN been the contract

purchaser, and had it chosen not to develop the property, Inland would have to

convey its ownership interest in the property to Crockett Capital (assuming that

Crockett Capital wished to develop it). The name on the sales contract only

mattered if neither party wished to develop the property or if Inland wished to

develop it on its own after Crockett Capital passed on the opportunity. That was

not the case with respect to the RTP Westin, which Crockett Capital always

intended to develop.

{102} Additionally, Inland has failed to forecast evidence that Crockett and

Winston changed the name on the sales contract with intent to deceive Inland. The

undisputed facts reveal that Crockett and Winston were responsible for pursuing

the Pipeline Properties under the Master Agreement. Mr. Sanchez, the seller’s

agent, required a quick execution of the contract, and he counted on Crockett and

Winston’s participation in the project. Neither Winston nor Crockett had any

authority to sign the contract on behalf of Inland. Crockett put the property in the

name of an entity that he and Winston controlled, and he negotiated language with

Mr. Sanchez that would allow assignment of the contract to a Joint Venture without

seller approval. Inland executive Mr. Broadfoot stated that with respect to the RTP

Westin, the Crockett team was “following the spirit of the [Master] agreement.”

(Broadfoot Dep. 237:12−18.)

{103} After the Master Agreement was executed, Crockett Capital submitted two

investment packages to Inland expressing its interest to own and operate the RTP

Westin with Inland. It is true that Crockett Capital did not disclose that the

contract purchaser had been changed. But, if the parties had followed the Master

Agreement’s provisions, the name of the contract purchaser would not have affected

the ownership outcome. Inland would have owned between eighty (80) and ninety-

five (95) percent of the property, or if it had declined to participate, it would have

owned none of it.

{104} “A claim of constructive fraud does not require the same rigorous

adherence to elements as actual fraud. Rather, this cause of action arises where a

confidential or fiduciary relationship exists, which has led up to and surrounded the

consummation of the transaction in which a [party] is alleged to have taken

advantage of his position of trust to the hurt of the [claimant].” Forbis v. Neal, 361

N.C. 519, 528, 649 S.E.2d 382, 388 (2007) (internal citations omitted). To state a

claim for constructive fraud, the claimant must “establish (1) facts and

circumstances creating a relation of trust and confidence; (2) which surrounded the

consummation of the transaction in which the defendant is alleged to have taken

advantage of the relationship; and (3) the defendant sought to benefit himself in the

transaction.” Marketplace Antique Mall, Inc. v. Lewis, 163 N.C. App. 596, 599, 594

S.E.2d 121, 124 (2004).

{105} At the time Crockett had the name of the contract purchaser changed,

Inland and Crockett Capital had not executed the Master Agreement. The Master

Agreement was signed at the end of July, at which time, the parties obtained the

rights and incurred duties specified in the contract. Each party would not become a

fiduciary of the other with respect to a particular Pipeline Property until they

executed the implementing documents required to create a Joint Venture for that

site. Crockett Capital did not submit a preliminary development package for the

RTP Westin until August 21, 2007. It did not submit a second proposal until

February 2008. The parties never formed a Joint Venture for the RTP Westin.

Thus, they are not fiduciaries with respect to the RTP Westin project. Additionally,

changing the name of the contract purchaser would not have caused harm to Inland

had the parties proceeded under the terms of the Master Agreement. Inland cannot

support a claim for constructive fraud related to the property.

{106} Inland cannot demonstrate actual or constructive fraud based on Crockett

Capital’s actions with respect to the RTP Westin property. Crockett Capital’s

Motion for Summary Judgment with respect to Defendants’ counterclaim

Alternative Count II(A): Fraud (Actual or Constructive) and Rescission of the

Master Agreement for Crockett Capital’s failing to disclose that it caused the name

of the purchaser of the RTP Westin to be changed to Winston Hospitality is hereby

GRANTED.

3.

Crockett Capital’s Alleged Intentional Interference

With Prospective Economic Advantage

{107} Inland alleges that Crockett Capital acted with intent to interfere with

Inland’s expectancy that it would be the buyer of the RTP Westin and that it had a

realistic expectation of future profit from the acquisition and development of the

property. (Counterclaim ¶¶ 89−90.) Crockett Capital seeks summary judgment on

this claim.

{108} “[I]nterference with a man’s business, trade or occupation by maliciously

inducing a person not to enter a contract with a third person, which he would have

entered into but for the interference, is actionable if damage proximately ensues.”

Dalton v. Camp, 353 N.C. 647, 654, 548 S.E.2d 704, 709 (2001). Crockett Capital

did not so interfere with Inland’s business. As noted above, Crockett acted within

the spirit of the then unexecuted Master Agreement in order to preserve the RTP

Westin opportunity for the Joint Venture that was to be formed for the property.

Had the parties acted in accordance with the terms of the Master Agreement, they

could have developed the property together. Crockett offered Inland two

opportunities to participate in owning the property under the terms of the Master

Agreement. Inland has forecasted no evidence to suggest that Crockett had a

malicious intent to interfere with Inland’s business opportunity.

{109} Crockett Capital’s Motion for Summary Judgment with respect to

Defendants’ counterclaim Alternative Count VII: Interference with Prospective

Economic Advantage is hereby GRANTED.

4.

Crockett Capital’s Alleged Breach of the Master Agreement

With Respect to the RTP Westin

{110} In its counterclaim, Inland alleges breach of contract with respect to

Crockett Capital’s failing to advise Inland that it was causing the identification of

the contract purchaser of the RTP Westin to be changed to Winston Hospitality, its

submitting a preliminary development proposal for the RTP Westin that was

materially misleading by its failure to identify the contract purchaser, and its

failure to pay Inland its RTP Westin Pursuit Costs. (Counterclaim Count IV(B),

Count IV(C), Count VIII.) Inland also alleges unjust enrichment with respect to

Crockett Capital’s failure to pay its RTP Westin Pursuit Costs. (Counterclaim

Count IX.)

{111} As noted above, whether a Winston/Crockett entity or Inland owned a

particular Pipeline Property was not material, as long as the parties proceeded

under the terms of the Master Agreement, and as long as Crockett Capital wished

to pursue the property. If Inland chose to participate in the project, it would have a

duty to proceed under the Master Agreement. If it chose not to proceed, under the

impasse provisions, it would have an obligation to convey any of its rights that it

had in the property to Crockett Capital (assuming Crockett Capital wished to

proceed alone or with a third party).

{112} Crockett acted to preserve the development opportunity for Inland and

Crockett Capital. Crockett Capital did not breach the Master Agreement with

respect to the RTP Westin. Crockett Capital’s Motion for Summary Judgment with

respect to Defendants’ counterclaim Alternative Count IV(B) and IV(C) is hereby

GRANTED.

{113} There is no dispute that Crockett Capital failed to fund the Pursuit Costs

Inland incurred related to the RTP Westin. Crockett Capital argues that its

obligation to fund these Pursuit Costs is excused by Defendants’ material breach of

the Master Agreement. As the Court finds above that Defendants did not breach

the Master Agreement in connection with the RTP Westin, Crockett Capital has not

demonstrated that it is excused from reimbursing the Pursuit Costs Defendants

might demonstrate at trial. Crockett Capital’s Motion for Summary Judgment with

respect to Defendants’ counterclaim Alternative Count VIII: Breach of Contract −

RTP Westin Pursuit Costs and Alternative Count IX: Unjust Enrichment − RTP

Westin Pursuit Costs is hereby DENIED.

C.

CLAIMS RELATED TO THE RDU ALOFT

1.

Inland’s Alleged Breach of the Master Agreement

With Respect to the RDU Aloft

{114} Crockett Capital seeks summary judgment on its First Claim for Relief:

Breach of Contract Relating to the RDU Aloft Property. (Pl.’s Resp. Br. 21; Pl.’s

Summ. J. Br. 33.) Inland also seeks summary judgment on this claim. (Defs.’

Summ J. Br. 21−22.) Crockett Capital argues that Inland breached the Master

Agreement by its failure to execute an operating agreement with Crockett Capital

for the property, and that Inland held back the easement required to develop the

property as “raw pretext, contrived when Inland’s first efforts to abrogate the

[Master] Agreement failed.” (Pl.’s Resp. Br. 21; Pl.’s Summ. J. Br. 33.)

{115} “The essence of any contract is the mutual assent of both parties to the

terms of the agreement so as to establish a meeting of the minds.” Snyder v.

Freeman, 300 N.C. 204, 218, 266 S.E.2d 593, 602 (1980). Inland has a duty to

convey the easement to Crockett Capital without any additional compensation only

if the Master Agreement, as originally negotiated between April and July 2007,

contemplates the easement’s automatic transfer from Inland or its affiliate (owner

of the Hilton Garden Inn after the June 2007 merger) to either a Joint Venture with

Crockett Capital and Inland, or to Crockett Capital alone. As noted above, the

Master Agreement was intended to include the material components of a joint

development once the decision was made to move forward with a particular

property. The only material item left open for negotiation was the division of each

party’s capital contribution to each Pipeline Property. The inclusion of the impasse

provisions obviates the need for the Court to supply missing terms to enforce the

agreement, and their inclusion indicates that the parties considered and agreed on

those terms. The parties made a conscious decision to leave open their respective

capital contribution obligation for each Pipeline Property.

{116} Plaintiff would have the Court hold that the transfer of the easement was

part of the Master Agreement. These were sophisticated parties. Where

agreements are “negotiated by sophisticated and well-counseled parties, courts are

extremely reluctant to interpret an agreement as impliedly stating something which

the parties have neglected to specifically include, and courts may not by

construction add or excise terms, nor distort the meaning of those used and thereby

make a new contract for the parties under the guise of interpreting the writing.”

Sony Ericsson, 195 N.C. App. at 582, 672 S.E.2d at 767.

{117} The Master Agreement and the implementation provisions do not mention

that the Hilton Garden Inn would be burdened by an easement for the benefit the

RDU Aloft. If the parties nonetheless envisioned the grant of the easement when

they negotiated the Master Agreement, they failed to include in its terms a property

right with significant value. Mr. Mark Woodworth, Inland’s expert, concluded that

the value of the easement to the owner of the Hilton Garden Inn was $1.9 million.

(Report of R. Mark Woodworth, March 5, 2010 at 6.) That number represents the

present value of the difference in profits that the owner of the Hilton Garden Inn

would earn if it did not grant the easement as compared to the profits it would earn

if it granted the easement. (Dep. of R. Mark Woodworth at 195.) Crockett Capital

insists that the value of the easement in September 2007 was zero, because the

Master Agreement required Inland to transfer “any” rights it had in the project if it

opted to pass on the opportunity to develop it with Crockett Capital, and the rights

it had at that time included the easement. (Pl.’s Reply Br. 12 n.7.) The granting of

the easement would allow the RDU Aloft to be built as envisioned. If the easement

went un-granted, the property would not have sufficient parking for the hotel

design. Whatever the value of the easement actually is to the Hilton Garden Inn, it

is not zero.

{118} In order for the Court to conclude that Inland breached its obligation to

execute the documents necessary to proceed in a Joint Venture for the RDU Aloft, it

would have to conclude that the Master Agreement required it to transfer the

easement to Crockett Capital for free. Regardless of whether Inland executives

knew of the need for the easement before the Master Agreement was executed

(which is disputed), the terms of the Master Agreement itself do not suggest that

the parties’ minds ever met on that term. On September 12, 2007, Inland’s board

conditionally authorized management to complete the RDU Aloft transaction.

There is a dispute about whether Inland had knowledge of the need for the

easement at the time of the board’s approval. Yet, there is no dispute that Crockett

Capital’s investment presentation to Inland’s board made no mention of the need for

the easement, even though Winston and Crockett were treating their presentations

to Inland as if they were presentations to the board of directors at Winston Hotels

before the merger. If the easement terms had been part of the parties’ bargain

when they negotiated the Master Agreement, the topic likely would have been

discussed by the parties during that presentation. The fact that Crockett Capital

simply left out a critical piece of the properties’ development requirements from

that presentation indicates that easement was not part of the original agreement.

{119} The Court would be forced to supply missing terms for both the Master

Agreement and the implementation provisions for the RDU Aloft, which, according

to Crockett Capital, were to be substantially similar for every project. The Court

would have to supply terms requiring the Inland affiliate to grant the easement, the

term of the easement, and the compensation to be paid for the easement. The

complex 156-page document made no mention of these terms, and the parties

considered no impasse provisions should a problem with the easement materialize.

{120} The Court will not supply these missing terms to the Master Agreement or

to the implementation provisions required for the RDU Aloft property.

{121} Because Crockett Capital insisted that Inland convey the easement to the

Joint Venture that would develop the RDU Aloft when that obligation was not part

of the original Master Agreement, Inland did not breach the Master Agreement by

refusing to execute documents to form the Joint Venture on terms foreign to the

Master Agreement.

{122} Crockett Capital’s Motion for Summary Judgment on its First Claim for

Relief: Breach of Contract Relating to the RDU Aloft Property is hereby DENIED.

Defendants’ Motion for Summary Judgment on Crockett Capital’s First Claim for

Relief: Breach of Contract Relating to the RDU Aloft Property is hereby

GRANTED.

2.

Crockett Capital’s Alleged Fraudulent Inducement

With Respect to the RDU Aloft

{123} Inland claims that it is entitled to rescind the Master Agreement and/or is

relieved from its duty to perform under it because Crockett Capital fraudulently

induced Inland into entering into the Master Agreement by its failing to disclose

that the RDU Aloft project would require the grant of an easement that would

significantly and detrimentally impact the adjacent Hilton Garden Inn, owned by

an Inland affiliate. (Counterclaim ¶ 53(B).) It also alleges that it was fraudulently

induced into approving Crockett Capital’s development proposal for the RDU Aloft

by Crockett Capital’s failure to disclose the need for the easement, and it seeks

rescission of that approval. (Counterclaim ¶¶ 69, 74, 75.) Inland bases these claims

for fraudulent inducement on both actual and constructive fraud. Crockett Capital

seeks summary judgment on these fraud claims.

{124} The fact that there was no meeting of the minds on the conveyance of the

easement as part of the Master Agreement does not imply that Crockett Capital

fraudulently induced Inland into entering into the Master Agreement and into

proceeding with the RDU Aloft development. Inland claims that Crockett Capital

committed fraud by failing to disclose the need for the easement during its

investment presentation. Though there is dispute about what information Mr. West

knew concerning the need for the easement and when he knew it, after the merger,

Crockett and/or Winston provided information to Inland in documents explicitly

stating the need to use the Hilton Garden Inn’s surplus parking for the RDU Aloft.

(Brown Dep. at 508:2−515:3.) Anyone at Inland who read those documents would

have understood that a parking transfer from the Hilton Garden Inn was necessary.

{125} Also, Inland cannot prove that it reasonably relied on the alleged

concealment. Inland states that it had no reason to search public records, a search

which would have shown the need for the easement, because it believed Crockett

Capital was supplying all relevant information concerning the project. (Defs.’ Resp.

Br. 17.) Crockett Capital did not give Inland information about the easement

during its investment presentation, but Inland already had the information in the

documents. It is not reasonable for Inland to rely on an investment presentation

for details about: (1) whether to execute the Master Agreement, and (2) whether to

proceed in a Joint Venture for the RDU Aloft when its due diligence with respect to

the Pipeline Properties should have included at least an inspection of the

documents in its possession and possibly title searches for those properties.

{126} Inland’s constructive fraud claim fails for the same reason as above. The

parties never formed a Joint Venture for the RDU Aloft property. Thus, they are

not fiduciaries with respect to the RDU Aloft project, and Inland cannot support a

claim for constructive fraud related to the property.

{127} Inland cannot demonstrate actual or constructive fraud based on Crockett

Capital’s actions with respect to the RDU Aloft property. Crockett Capital’s Motion

for Summary Judgment with respect to Defendants’ counterclaim Alternative Count

II(B): Fraud (Actual or Constructive) and Rescission of the Master Agreement for

Crockett Capital’s failing to disclose that the RDU Aloft would require the grant of

an easement and Alternative Count V: Fraud (Actual or Constructive) and

Rescission of RDU Aloft Approval is hereby GRANTED.

3.

Crockett Capital’s Alleged Negligent Misrepresentation

{128} Inland claims that Crockett Capital was negligent in failing to disclose to

Inland the need for and the impact of the required easement on the adjacent Hilton

Garden Inn and in failing to disclose all of the existing and potential competition

that the proposed RDU Aloft would face. (Counterclaim ¶¶ 83, 84.) Crockett

Capital seeks summary judgment on this claim.

{129} The tort of negligent misrepresentation occurs when a party justifiably

relies to his detriment on information prepared without reasonable care by one who

owed the relying party a duty of care. Sullivan v. Mebane Packaging Group, Inc.,

158 N.C. App. 19, 33, 581 S.E.2d 452, 462 (2003). “As with fraud, plaintiff's reliance

must have been reasonable in order to recover under a theory of negligent

misrepresentation.” Id.

{130} As noted above, Crockett and/or Winston provided documents to Inland

describing the need for an easement to develop the RDU Aloft after the companies’

merger. Inland’s reasonable due diligence in the Pipeline Properties should have

included, at a minimum, an inspection of the documents in its possession that

would have demonstrated the need for the easement. Inland did not conduct

adequate due diligence on this Pipeline Property. Its reliance on the presentation

and investment summary that Crockett Capital prepared for the RDU Aloft was not

reasonable, and it cannot support a negligent misrepresentation claim.

{131} Crockett Capital’s Motion for Summary Judgment on Defendants’

counterclaim Alternative Count VI: Negligent Misrepresentation − RDU Aloft is

hereby GRANTED.

4.

Crockett Capital’s Alleged Breach of the Master Agreement

With Respect to the RDU Aloft

{132} Inland claims that Crockett Capital materially breached the Master

Agreement by submitting a predevelopment proposal for the RDU Aloft that was

materially misleading in its assertion that “[p]arking will be accommodated with

on-site surface spaces,” when Crockett Capital knew that a significant number of

spaces would come from the Hilton Garden Inn. (Counterclaim ¶ 65(D).)

{133} This Court has determined that the Master Agreement does not require

Inland to transfer the easement to a Joint Venture with Crockett Capital. Because

Crockett Capital cannot insist that Inland grant the easement for free, Inland is not

duty-bound to enter into a Joint Venture with Crockett Capital under those terms.

Thus, even if Crockett Capital did materially breach the Master Agreement by

submitting a misleading development proposal (an issue on which the Court

declines to rule), Inland has suffered no damages to support a material breach of

contract claim.

{134} Crockett Capital’s Motion for Summary Judgment on Defendants’

counterclaim Alternative Count IV(D): Submitting an Allegedly Misleading

Development Proposal for the RDU Aloft is hereby GRANTED.

D.

CLAIMS RELATED TO THE

HIRING OF BRENT WEST

{135} Inland claims that it was fraudulently induced into entering the Master

Agreement by Crockett Capital’s fraudulently concealing “ongoing discussions with

Mr. West about his becoming employed by [Crockett Capital] and Winston

Hospitality, Inc. at a time when Mr. West was representing Inland in the ongoing

negotiations over the Development Memorandum and advising Inland as to various

development proposals being submitted” by Crockett Capital. (Counterclaim ¶ 53.)

It also claims that these facts give rise to a material breach of contract claim.

(Counterclaim ¶ 65(E).)

{136} As noted above, in order to prevail on a fraudulent inducement claim,

Inland must demonstrate “false representation of a past or subsisting material fact,

made with fraudulent intent and with knowledge of its falsity, which representation

was relied upon when the party executed the instrument.” In re Estate of Loftin,

285 N.C. 717, 722, 208 S.E.2d 670, 674 (1974).

{137} Inland claims demonstrate only that Mr. West had contact with Winston

concerning his possible employment with a Winston/Crockett entity during the time

he was employed with Inland. (See Defs.’ Resp. Br. 21.) Inland has forecast no

evidence that Winston or Crockett actually solicited Mr. West for employment. The

Honorable Judge Stephens found in a prior case between these parties in Wake

County Superior Court that Mr. West approached Winston about his possible

employment and was rebuffed. Winston hired Mr. West only after his employment

with Inland was concluded and after he had cleared the hiring with Mr. McGuiness

from Inland.

{138} Additionally, Inland has forecast no evidence that anyone from Crockett

Capital influenced Mr. West to act contrary to Inland’s best interests while he was

employed there.

{139} Inland can demonstrate no elements of fraudulent inducement or material

breach of contract based on Winston’s conversations with Mr. West and Mr. West’s

ultimate hiring. Thus, Crockett Capital’s Motion for Summary Judgment on

Defendants’ counterclaim Alternative Count II(C): Fraud (Actual or Constructive)

and Rescission of the Master Agreement and Alternative Count IV(E): Declaratory

Judgment − Material Breach of Contract for Crockett Capital’s failing to disclose its

discussions with Mr. West is hereby GRANTED.

E.

CROCKETT CAPITAL’S ALLEGED MATERIAL BREACH

OF THE MASTER AGREEMENT FOR FAILURE TO

PROVIDE DEVELOPMENT PROPOSALS

{140} Inland alleges that Crockett Capital materially breached the Master

Agreement by failing to provide preliminary development proposals to Inland by

August 29, 2007. (Counterclaim ¶ 65(A).) Crockett Capital seeks summary

judgment on this claim.

{141} The Master Agreement sets out deadlines by which Crockett Capital was

to submit its first package for each property. Because the Master Agreement was

not signed until July 30, 2007, many of these deadlines turned out to be unrealistic.

(Pl.’s Summ. J. Br. 32.) Crockett Capital periodically provided updates to Inland on

when it would submit the packages, and it met those deadlines. (Crockett Aff. ¶

10.) Crockett Capital did not submit packages for certain of the Pipeline Properties

that became unviable. (Crockett Aff. ¶ 10.) Inland never complained about these

developments. (Crockett Aff. ¶ 10.) In fact, Mr. Brown, who took over for Inland in

October 2007, stated that he “was fine with what I had seen when I got involved in

October.” (Brown Dep. 583:10−19.)

{142} Crockett Capital’s late submissions were not a material breach of the

Master Agreement. Crockett Capital’s Motion for Summary Judgment on

Defendants’ counterclaim Alternative Count IV(A): Declaratory Judgment −

Material Breach of Contract for failing to submit timely development proposals is

hereby GRANTED.

F.

INLAND’S UNFAIR AND DECEPTIVE

TRADE PRACTICES CLAIM

{143} Inland alleges that Crockett Capital’s common law and/or constructive

fraud, its unethical and deceptive actions, and the “substantial aggravating

circumstances” surrounding its breach of the Master Agreement constitute unfair

and deceptive trade practices within the meaning of the North Carolina Unfair and

Deceptive Trade Practices Act (“UDTPA”), N.C. Gen. Stat. § 75-1.1. (Counterclaim

¶ 61.) Crockett Capital seeks summary judgment on Inland’s claim. In order to

establish a violation of the UDTPA, a claimant must show: “(1) an unfair or

deceptive act or practice, (2) in or affecting commerce, which (3) proximately caused

actual injury to the claimant.” Nucor Corp. v. Prudential Equity Group, LLC, 189

N.C. App. 731, 738, 659 S.E.2d 483, 488 (2008).

{144} This Court has granted Crockett Capital’s Motion for Summary Judgment

on Defendants’ fraud claims and Defendants’ claims related to any breach of the

Master Agreement except with respect to the alleged Pursuit Costs incurred for the

RTP Westin. That breach of contract claim does not contain aggravating

circumstances that would constitute a claim for unfair and deceptive trade

practices. Nor have Defendants forecast evidence to suggest that Crockett Capital’s

actions were unethical or have a capacity or tendency to deceive. Thus, Defendants

have failed to forecast evidence to establish an unfair or deceptive act or practice

within the meaning of the UDTPA.

{145} Crockett Capital’s Motion for Summary Judgment on Defendants’

counterclaim Alternative Count III: Unfair and Deceptive Trade Practices is hereby

GRANTED.

G.

CROCKETT CAPITAL’S UNFAIR AND DECEPTIVE

TRADE PRACTICES CLAIM

{146} In its Third Claim for Relief, Crockett Capital asserts that Inland pursued

an unfair and deceptive course of conduct, which constituted an aggravated breach

of contract, and which constitutes unfair and deceptive trade practices within the

meaning of the UDTPA. Inland seeks summary judgment on the claim.

{147} A breach of contract accompanied by substantial aggravating

circumstances violates the statute. See Johnson v. Colonial Life & Acc. Ins. Co., 173

N.C. App. 365, 371 (2005).

{148} First, Crockett Capital contends that Inland wrongfully investigated the

“private” e-mails of Crockett Capital and its employees in anticipation of and in

connection with the litigation between the parties. (Compl. ¶ 129 (j),(k).) Crockett

Capital’s e-mails were housed on Inland’s server. Inland requested that Crockett

Capital discontinue its use of Inland’s servers after July 1, 2007, but Crockett

Capital requested that it be permitted access to the server after that time. Winston

had an expectation that the e-mails would remain private, but no one from Inland

made that representation. Furthermore, Crockett Capital had no legal expectation

that the e-mails would be confidential. Finally, Inland was required to review e-

mails by Crockett Capital employees in response to discovery requests in this

litigation. Inland’s reading of Crockett Capital’s e-mails located on Inland’s server

does not support a UDTPA violation.

{149} Crockett Capital also contends that Inland violated the UDTPA by filing a

lawsuit on the alleged solicitation of Brent West. (Compl. ¶ 129(l).) The filing of an

“objectively reasonable” lawsuit cannot constitute an unfair trade practice under

the UDTPA. First Union Nat’l Bank v. Brown, 166 N.C. App. 519, 534, 603 S.E.2d

808, 819 (2004). Inland’s suit concerning Mr. West would extend the law in North

Carolina concerning solicitation, but it is not “objectively unreasonable.” Thus, it

cannot support Crockett Capital’s UDTPA claim.

{150} Next, Crockett Capital claims that Inland cut off construction management

payments to Crockett Capital “without a good faith basis, thus interrupting

[Crockett Capital’s] cash flow, in an attempt to coerce Crockett Capital into

abrogating the Master Agreement, and forcing Crockett Capital to spend legal fees

to recover payments. This claim was settled during arbitration in August 2008.

(Def.’s Summ. J. Br. 30.) Neither party admitted liability, and, in accordance with

the settlement agreement, the arbitration was dismissed with prejudice. (Def.’s

Summ. J. Br. 30.) Crockett Capital cannot use this settled claim to support its

UDTPA assertion.

{151} Crockett Capital’s breach of contract claims still viable under this Order

and Opinion are the claims related to the Raleigh Hampton/Aloft and Chapel Hill

Aloft. Any substantial aggravating circumstances that could form a basis for a

violation of the UDTPA must relate to those alleged breaches. The remainder of

Crockett Capital’s claims are that Inland attempted to coerce it into abrogating the

Master Agreement by “holding hotel sites hostage” in a way that would prevent

Crockett Capital from generating income (Compl. ¶ 129(a)); concealed that it would

abrogate the Master Agreement and misrepresenting its intentions with respect to

specific projects, while Crockett Capital was building value in the projects in

reliance on the Master Agreement (Compl. ¶ 129(b)); lobbied Starwood and Hilton

in a way that damaged Crockett Capital’s reputation and the concealment of that

effort (Compl. ¶ 129(c), (d), (g), (h)); and misrepresented its intentions with respect

to the Raleigh Hampton/Aloft and blocking its development (Compl. ¶ 129 (i)).

{152} While these surviving circumstances may indicate a lack of good faith on

the part of Inland, they amount to little more than breach of contract claims. They

do not rise to the level of “substantial aggravating circumstances” which violates

the statute. Defendants’ Motion for Summary Judgment with respect to Plaintiff’s

Third Claim for Relief: N.C. Unfair and Deceptive Trade Practices Act is hereby

GRANTED.

V.

CONCLUSION

{153} Based on the foregoing, it is hereby ORDERED, ADJUDGED, and

DECREED that:

{154} Plaintiff Crockett Capital’s Motion for Summary Judgment on the

following claims is hereby GRANTED:

(1) Defendants’ counterclaim Count I: Declaratory Judgment on the

Enforceability of the Master Agreement.

(2) Defendants’ counterclaim Alternative Count II(A): Fraud (Actual or

Constructive) and Rescission of the Master Agreement for Crockett Capital’s failing

to disclose that it caused the name of the purchaser of the RTP Westin to be

changed to Winston Hospitality.

(3) Defendants’ counterclaim Alternative Count II(B): Fraud (Actual or

Constructive) and Rescission of the Master Agreement for Crockett Capital’s failing

to disclose that the RDU Aloft would require the grant of an easement.

(4) Defendants’ counterclaim Alternative Count II(C): Fraud (Actual or

Constructive) and Recession of the Master Agreement for Crockett Capital’s failing

to disclose conversations with Mr. West about his becoming employed by Crockett

Capital and Winston Hospitality.

(5) Defendants’ counterclaim Alternative Count III: Unfair and Deceptive

Trade Practices.

(6) Defendants’ counterclaim Alternative Count IV(A): Declaratory

Judgment − Material Breach of Contract for failing to submit timely development

proposals.

(7) Defendants’ counterclaim Alternative Count IV(B), (C): Declaratory

Judgment − Material Breach of Contract for Crockett Capital’s failing to advise

Inland that it was causing the identification of the contract purchaser of the RTP

Westin to be changed to Winston Hospitality and for its submitting a proposal to

Inland to develop the RTP Westin without divulging that the name had been

changed.

(8) Defendants’ counterclaim Alternative Count IV(D): Declaratory

Judgment − Material Breach of Contract for Submitting an Allegedly Misleading

Development Proposal for the RDU Aloft.

(9) Defendants’ counterclaim Alternative Count IV(E): Declaratory

Judgment − Material Breach of Contract for Crockett Capital’s failing to disclose its

discussions with Mr. West.

(10) Defendants’ counterclaim Alternative Count V: Fraud (Actual or

Constructive) and Rescission of RDU Aloft Approval.

(12) Defendants’ counterclaim Alternative Count VI: Negligent

Misrepresentation − RDU Aloft.

(12) Defendants’ counterclaim Alternative Count VII: Interference with

Prospective Economic Advantage.

{155} Crockett Capital’s Motion for Summary Judgment on the following claims

is hereby DENIED:

(1) Plaintiff’s Motion for Summary Judgment on its First Claim for Relief:

Breach of Contract Relating to the RDU Aloft.

(2) Plaintiff’s Motion for Summary Judgment on its Second Claim for

Relief for Breach of Contract Relating to the RTP Westin.

(3) Plaintiff’s Motion for Summary Judgment on its Second Claim for

Relief for Breach of Contract Relating to the Raleigh Hampton/Aloft.

(4) Plaintiff’s Motion for Summary Judgment on its Second Claim for

Relief for Breach of Contract Relating to the Chapel Hill Aloft.

(5) Plaintiff’s Motion for Summary Judgment with respect to Defendants’

counterclaim Alternative Count VIII: Breach of Contract − RTP Westin Pursuit

Costs and Alternative Count IX: Unjust Enrichment − RTP Westin Pursuit Costs.

{156} Defendants’ Motion for Summary Judgment on the following claims is

hereby GRANTED:

(1) Crockett Capital’s First Claim for Relief: Breach of Contract Relating

to the RDU Aloft Property.

(2) Crockett Capital’s Second Claim for Relief Relating to the RTP Westin.

(3) Crockett Capital’s Third Claim for Relief: N.C. Unfair and Deceptive

Trade Practices Act.

{157} Defendants’ Motion for Summary Judgment on all other claims is hereby

DENIED.

{158} The remaining claims in this case that are ripe for trial are:

(1) Plaintiff’s Second Claim for Relief for Breach of Contract Relating to

the Raleigh Hampton/Aloft.

(2) Plaintiff’s Second Claim for Relief for Breach of Contract Relating to

the Chapel Hill Aloft.

(3) Defendants’ counterclaim Alternative Count VIII: Breach of Contract −

RTP Westin Pursuit Costs and Alternative Count IX: Unjust Enrichment − RTP

Westin Pursuit Costs.

IT IS SO ORDERED, this 28th day of February, 2011.