Jiangmen Kinwai Furniture v. IHFC Properties, LLC ( 2019 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 18-1136
JIANGMEN KINWAI FURNITURE DECORATION CO. LTD,
Plaintiff – Appellant,
v.
IHFC PROPERTIES, LLC; ZUO MODERN CONTEMPORARY, INC.,
Defendants – Appellees,
and
SCOTT ECKMAN; JULIE MESSNER; SHARISSE CUMBERBATCH;
RICHARD KRAPFEL; IMC MANAGER LLC; IMC OP LP; AND
INTERNATIONAL MARKET CENTERS LP,
Movants – Appellees,
and
MARK SILVER,
Movant.
No. 18-1137
JIANGMEN KINWAI FURNITURE DECORATION CO. LTD,
Plaintiff – Appellant,
v.
IHFC PROPERTIES, LLC,
Defendant – Appellee,
and
ZUO MODERN CONTEMPORARY, INC.,
Defendant,
and
SCOTT ECKMAN; JULIE MESSNER; SHARISSE CUMBERBATCH;
RICHARD KRAPFEL; IMC MANAGER LLC; IMC OP LP; AND
INTERNATIONAL MARKET CENTERS LP,
Movants – Appellees,
and
MARK SILVER,
Movant.
No. 18-1177
JIANGMEN KINWAI FURNITURE DECORATION CO. LTD,
Plaintiff – Appellee,
v.
IHFC PROPERTIES, LLC,
Defendant – Appellant,
and
ZUO MODERN CONTEMPORARY, INC.,
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Defendant,
v.
MARK ADAM SILVER; SCOTT ECKMAN; JULIE MESSNER; SHARISSE
CUMBERBATCH; RICHARD KRAPFEL; IMC MANAGER LLC,
Movants.
Appeals from the United States District Court for the Middle District of North Carolina at
Greensboro. N. Carlton Tilley, Jr., Senior District Judge. (1:14-cv-00689-NCT-JLW)
Submitted: February 19, 2019 Decided: June 24, 2019
Before WILKINSON, KEENAN, and RICHARDSON, Circuit Judges.
Affirmed in part, vacated in part, and remanded by unpublished per curiam opinion.
Venus Y. Springs, SPRINGS LAW FIRM PLLC, Charlotte, North Carolina; Herman
Kaufman, HERMAN KAUFMAN, ESQ., Old Greenwich, Connecticut, for
Appellant/Cross-Appellee. Andrew S. Lasine, KEZIAH GATES, LLP, High Point,
North Carolina, for Appellees/Cross-Appellants IHFC Properties, LLC, Scott Eckman,
Julie Messner, Sharisse Cumberbatch, Richard Krapfel, IMC Manager LLC, IMC OP LP,
and International Market Centers LP. John C. Kirke, DONAHUE FITZGERALD LLP,
Oakland, California; Scott F. Wyatt, WYATT, EARLY, HARRIS & WHEELER, LLP,
High Point, North Carolina, for Appellee Zuo Modern Contemporary, Inc.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Twice a year, the International Home Furnishings Center in High Point, North
Carolina, hosts a market where furniture manufacturers display their wares for
commercial buyers. Jiangmen Kinwai Furniture Decoration Co. Ltd. (“JK Furniture”)
leased a showroom at the Center from IHFC Properties, LLC (“IHFC”). The lease
permitted IHFC, in its sole discretion, to move JK Furniture to a different showroom of
equivalent size and value on the premises. Zuo Modern Contemporary, Inc. (“Zuo”), one
of JK Furniture’s competitors, asked to take over JK Furniture’s showroom; IHFC agreed
and moved JK Furniture to a different location. Rather than accept its new showroom,
JK Furniture filed this lawsuit, seeking a preliminary injunction. When the district court
denied the injunction, JK Furniture refused to pay rent to IHFC and ultimately leased a
showroom from a different landlord, all the while continuing to seek damages from
IHFC. IHFC filed a counterclaim for unpaid rent.
At summary judgment, the district court ruled against JK Furniture on its claims.
The court also ruled for IHFC on its counterclaim and awarded it unpaid rent plus
interest. JK Furniture appeals the judgment against it as well as various other rulings by
the district court; IHFC cross-appeals on the limited ground that the district court used the
wrong interest rate in calculating the size of the award on its counterclaim. We affirm the
district court in all respects but one: we agree with IHFC about the interest rate.
Providing IHFC with broad discretion in allocating space, the lease reads:
Lessee acknowledges and agrees that it is essential to the
orderly and efficient operation of the Home Furnishings
Center by IHFC that IHFC have the right from time to time to
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relocate lessees in order to achieve optimum utilization of all
space in the Home Furnishings Center. Consequently, IHFC
shall have the absolute right to relocate Lessee as provided in
this Section if IHFC determines in its sole discretion that
relocation of Lessee is in the best interest of the Home
Furnishings Center in the conduct of its business. IHFC shall
exercise its right to relocate Lessee in the following manner:
(a) the premises to which Lessee is to be relocated (the “New
Premises”) shall be selected by IHFC and shall be equivalent
to or greater than the original Premises in size and value (all
as determined by IHFC in its sole discretion); (b) IHFC shall
notify Lessee of its intent to relocate Lessee within a time
period prior to the commencement of the next Market such
that the Lessee has a reasonable period of time (as determined
by IHFC in its sole discretion) to refixture, redecorate, and
prepare to show at that Market and identify the New
Premises, . . . (d) all alterations, additions and improvements
to the original Premises shall become property of IHFC, . . .
[and] (f) IHFC, at its expense, shall move Lessee’s property
to the New Premises . . . .
J.A. 52 (emphases added). While JK Furniture asserts several different causes of action,
they all rest on the fundamental allegation that IHFC violated this provision. IHFC
allegedly provided JK Furniture with a new showroom that was not equivalent in size and
value to the old one, failed to use due care when disassembling the furniture in JK
Furniture’s old showroom and moving it to the new showroom, and did not give JK
Furniture enough time to prepare its new showroom for the upcoming market.
The district court properly granted summary judgment for IHFC and Zuo on JK
Furniture’s claims, because JK Furniture did not adduce evidence showing that IHFC
breached its obligations under the lease. Under North Carolina law, when one party has
sole discretion under a contract, it may use that discretion so long as it does not violate its
implied duty of good faith and fair dealing. See Leone v. Tyco Elecs. Corp., 407 F.
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App’x 749, 751 (4th Cir. 2011) (citing Midulla v. Howard A. Cain Co., 515 S.E.2d 244,
246 (N.C. Ct. App. 1999); Mezzanotte v. Freeland, 200 S.E.2d 410, 414 (N.C. Ct. App.
1973)). The undisputed evidence shows a good faith business purpose underlying
IHFC’s conduct: there was unused, empty space behind JK Furniture’s showroom; Zuo
proposed to expand the showroom and use the empty space, while paying more than JK
Furniture per square foot; and IHFC would earn substantial extra rent by accepting Zuo’s
proposal and moving JK Furniture to a new showroom. JK Furniture points to no
evidence that IHFC lacked good faith in determining that JK Furniture’s new showroom
was at least equivalent to the old showroom in size and value. Similarly, to the extent
that JK Furniture challenges the timing of IHFC’s decision, there was no evidence that
IHFC lacked good faith in determining that JK Furniture had adequate time to prepare its
new showroom for the upcoming market; if anything, the evidence suggests that JK
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Furniture was not ready because it chose to resist the move rather than act promptly.
In short, IHFC did not violate the lease. Rather, IHFC acted exactly as the lease
contemplated, exercising its discretion in good faith in order to achieve “optimum
utilization of all space” in the Center. That also means Zuo cannot be held liable for
inducing a breach of the lease.
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Nor has JK Furniture drawn to our attention a genuine issue of material fact
supporting its claim that IHFC unlawfully damaged its furniture. JK Furniture has
identified only limited evidence of damage, consisting largely of a few pictures of
furniture with scuff marks and dust. JK Furniture has pointed us to no evidence that this
damage went beyond incidental wear and tear of the sort that often occurs when moving
furniture. And JK Furniture has failed to explain how this violated the lease.
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JK Furniture raises a host of procedural issues about the pleadings, discovery, and
other matters. Many relate to JK Furniture’s misguided efforts to turn this case, a
straightforward lease dispute, into litigation about IHFC’s corporate structure. For
example, JK Furniture sought to file an amended complaint that pierced IHFC’s
corporate veil to reach its parent companies. The district court granted leave to amend in
part while properly denying JK Furniture’s request to add the parent companies as
defendants. JK Furniture then filed an amended complaint with new allegations the
district court did not permit. The court struck the complaint, and JK Furniture never
sought to file another amended complaint that complied with the court’s orders. 2 JK
Furniture also attempted to issue subpoenas to IHFC’s corporate affiliates and, somewhat
astonishingly, the U.S. Securities and Exchange Commission. And it made related
arguments about standing and the competency of witnesses that were meritless and, in at
least one instance, frivolous.
We see no need to address these procedural issues in detail, because they are mere
distractions that do nothing to save JK Furniture’s case on the merits. They remain
2
JK Furniture argues that the district court erred in striking the complaint because
it did not contain “redundant, immaterial, impertinent, or scandalous matter.” Fed. R.
Civ. P. 12(f). But Rule 12(f) is not the only basis for striking a complaint. A district
court may also strike a complaint filed without leave of the court in violation of Rule
15(a)(2). In this case, the district court’s decision to strike the entire complaint, not just
the unauthorized allegations, was admittedly harsh. However, the district court did not
prohibit JK Furniture from filing another amended complaint that complied with its
orders. JK Furniture simply never tried to do so. Furthermore, the new allegations about
IHFC’s corporate affiliates had at least a whiff of bad faith about them. Thus, the district
court did not exceed its discretion.
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relevant only because JK Furniture’s conduct in litigating these issues led the district
court to contemplate sanctions against JK Furniture and one of its lawyers, Venus
Springs. The court required JK Furniture and Springs to pay modest attorney’s fees
arising from their subpoenas, which sought irrelevant documents and testimony. The
district court also found that Springs had made a frivolous argument in a motion, but it
ultimately did not impose sanctions on that ground, in part because it granted Springs
what it termed “the benefit of an inference of incompetence”—that is, it inferred that
incompetence, not bad faith, brought about the frivolous argument in Springs’s filings.
J.A. 2982. Unsurprisingly, Springs does not find this inference so beneficial. She claims
that, even though the district court did not issue a formal sanction against her, its findings
were so harmful to her professional reputation that they constituted a public censure.
Both she and JK Furniture appeal.
We find no error in the district court’s rulings on sanctions and fees. We note that
Springs has done herself no favors through her filings on appeal, which contain
misstatements of law and make unwarranted accusations against opposing counsel.
The district court also properly granted summary judgment for IHFC on its
counterclaim for unpaid rent. JK Furniture stopped paying the rent it owed after IHFC
decided to move its showroom. And it has not raised a genuine issue of material fact
about the amount of unpaid rent. However, the district court misinterpreted the lease
provision concerning interest for unpaid rent. The lease provides for interest “at the
lower of one and one-half percent (1-1/2%) per month or the maximum lawful rate.” J.A.
388. The district court held “maximum lawful rate” to mean the “legal rate” of eight
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percent per year provided by N.C. Gen. Stat. § 24-1. Yet this interpretation improperly
read the word “maximum” out of the lease. In context, the term “maximum lawful rate”
means the limit, if any, imposed by North Carolina usury law. North Carolina usury law
does not limit interest provided for in a lease. Beau Rivage Plantation, Inc. v. Melex
USA, Inc., 436 S.E.2d 152, 156 (N.C. Ct. App. 1993). IHFC was therefore entitled to the
full 1.5% monthly interest rate. Accordingly, we vacate the award of interest to IHFC
and remand to the district court for the sole purpose of recalculating the interest owed and
revising the judgment accordingly.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED
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