Oset v. Interstate Brokerage ( 2000 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
HENRY P. OSET, 
Plaintiff-Appellee,
v.
 No. 00-1029
INTERSTATE BROKERAGE OF THE
SOUTHEAST, INCORPORATED,
Defendant-Appellant.

HENRY P. OSET, 
Plaintiff-Appellant,
v.
 No. 00-1109
INTERSTATE BROKERAGE OF THE
SOUTHEAST, INCORPORATED,
Defendant-Appellee.

Appeals from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
Terrence W. Boyle, Chief District Judge.
(CA-99-185-5-BO)
Argued: November 3, 2000
Decided: December 19, 2000
Before WIDENER, MICHAEL, and MOTZ, Circuit Judges.
Affirmed by unpublished per curiam opinion.
2 OSET v. INTERSTATE BROKERAGE OF THE SOUTHEAST
COUNSEL
ARGUED: Margaret Cain Lumsden, UNTI, LUMSDEN & SMITH,
P.A., Raleigh, North Carolina, for Appellant. Steven Jay Vining,
GLASS & VINING, L.L.C., Cary, North Carolina, for Appellee. ON
BRIEF: Sharon L. Smith, UNTI, LUMSDEN & SMITH, P.A.,
Raleigh, North Carolina, for Appellant.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Henry Oset sued Interstate Brokerage of the Southeast, Inc. (IBS),
alleging violations of the North Carolina Business Opportunities Sales
Act (BOSA) and Unfair and Deceptive Trade Practices Act
(UDTPA). He sought a refund of the purchase price he paid under a
licensing contract for a coffee service business. The district court
entered summary judgment in favor of Oset and awarded him treble
damages in the amount of $66,897. The court denied Oset’s motion
for attorneys’ fees. We affirm these decisions.
I.
The essential facts are undisputed. In the winter of 1997-1998 Oset
became interested in starting a business in Raleigh, North Carolina,
because he and his family wanted to move there from New York.
Oset learned that IBS, a franchise broker located in Florida, was
offering business opportunities in North Carolina. In his first tele-
phone conversation with an IBS representative, Oset learned that the
business opportunity involved purchasing, locating sites for, and ser-
vicing automated espresso/cappuccino machines placed mainly in
hotels and restaurants. Oset told IBS that he was interested in running
a business only in the Raleigh area.
OSET v. INTERSTATE BROKERAGE OF THE SOUTHEAST 3
In March of 1998 IBS sent Oset written materials describing the
business offering in greater detail. A letter introducing the materials
said that IBS’s business offering is "most profitable" and that its mar-
keting techniques "generate[ ] excellent revenue potential." The mate-
rials described IBS’s five-day training program in which IBS
representatives offer investors "suggestions for acquiring accounts"
and "personally assist the Purchaser in acquiring and installing their
first five (5) machines." The materials illustrated various earnings
scenarios. A disclaimer noted that there were no guarantees of income
and that the earnings computations were not meant as forecasts of
income.
On March 24, 1998, Oset submitted an application to IBS, indicat-
ing his exclusive interest in the Raleigh area. An IBS sales representa-
tive went to Oset’s home in New York on March 26, 1998, where
Oset and the representative signed a licensing contract. The contract
stated that Raleigh was Oset’s "area of primary responsibility." Oset
paid IBS a total of $22,299, a purchase price of $18,799 and $3,500
for the training course.
An IBS representative gave Oset his training course in Raleigh, and
the company representative helped Oset find initial locations for the
coffee machines. IBS sent all of the machinery and supplies that Oset
needed to North Carolina. About two months into operations, Oset
realized that the business was not as profitable as he believed IBS had
suggested. Oset contacted George Fry, president of IBS, to request a
refund, but Fry refused the request.
Oset then sought the assistance of the North Carolina Attorney
General’s office, which wrote IBS two letters stating that Oset was
entitled to void the licensing contract because IBS had failed to com-
ply with BOSA’s disclosure and registration provisions. See N.C.
Gen. Stat. § 66-100(a). The statute requires sellers of business oppor-
tunities to provide to purchasers a disclosure statement that conforms
to the specifications laid out in BOSA. The disclosure statement,
which is to be filed with the North Carolina Secretary of State, must
contain certain information about the seller and suggest that purchas-
ers should seek the advice of a lawyer before entering into the deal.
See N.C. Gen. Stat. §§ 66-95, 66-97. BOSA also mandates that busi-
ness opportunity contracts inform the purchaser that the North Caro-
4 OSET v. INTERSTATE BROKERAGE OF THE SOUTHEAST
lina Secretary of State has been designated as the seller’s agent for
service of process, as required by another provision of the statute. See
N.C. Gen. Stat. §§ 66-97, 66-99. In response to the Attorney Gener-
al’s letter, IBS did not dispute that it had not complied with BOSA.
Instead, it asserted that North Carolina law did not apply. The Attor-
ney General’s office did not pursue the matter further.
In February 1999 Oset filed a complaint against IBS in Wake
County Superior Court, alleging violations of BOSA and UDTPA and
seeking to void the licensing contract. Because there is diversity of
citizenship, IBS removed the action to the Eastern District of North
Carolina. IBS then moved to dismiss on the ground that neither
BOSA nor UDTPA apply to a licensing contract entered into in New
York. IBS also moved to strike two paragraphs of Oset’s complaint,
claiming that one of the paragraphs contains information that is the
subject of privileged settlement negotiations and that the other inap-
propriately characterizes IBS’s litigation position. Oset moved for
summary judgment and for attorneys’ fees.
The district court denied IBS’s motion to dismiss, holding that IBS
cannot rely on the rule that the law of the place of execution of a con-
tract applies because the complaint does not allege a breach of the
licensing contract or raise a dispute about the meaning of its terms.
Rather, the complaint alleges violations of BOSA and UDTPA occur-
ring in North Carolina. The district court also denied IBS’s motion to
strike because Oset’s complaint did not contain inappropriate or privi-
leged information. The district court then granted Oset’s motion for
summary judgment, concluding that there was no dispute that IBS had
sold Oset a "business opportunity" as defined by BOSA and that IBS
had failed to comply with BOSA’s registration and disclosure require-
ments. Oset was therefore awarded a refund of the contract price, the
remedy provided for in BOSA. Because a violation of BOSA consti-
tutes an unfair trade practice, the district court trebled Oset’s damages
under UDTPA. See N.C. Gen. Stat. §§ 66-100(e), 75-16. The court
denied Oset’s motion for attorneys’ fees, however, because Oset did
not show that IBS’s violations were willful or that its refusal to settle
the matter was unwarranted. IBS appeals the denials of its motions to
dismiss and to strike and the grant of Oset’s motion for summary
judgment. Oset appeals the denial of attorneys’ fees.
OSET v. INTERSTATE BROKERAGE OF THE SOUTHEAST 5
II.
After reviewing the briefs and the joint appendix and considering
the oral arguments of counsel, we are persuaded that the district court
reached the correct result. Accordingly, we affirm substantially on the
reasoning of the district court. See Oset v. Interstate Brokerage of the
Southeast, Inc., No. 5:99-CV-185-BO(2) (E.D.N.C. Nov. 30, 1999).*
AFFIRMED
*IBS contends that it was not allowed to discover whether Oset made
any profit in the coffee service business. Thus, IBS says that awarding
Oset a refund of the contract price might result in unjust enrichment to
him, in violation of BOSA. See N.C. Gen. Stat. § 66-100(a) ("[The] pur-
chaser shall not be entitled to unjust enrichment by exercising the reme-
dies provided in this subsection."). We reject IBS’s unjust enrichment
argument. "Unjust enrichment of a person occurs when he has and
retains money or benefits which in justice and equity belong to another."
Am. Jur. 2d Restitution and Implied Contracts § 3 (1973). There is no
suggestion that Oset did not return the machines and any unused supplies
to IBS. Under BOSA, therefore, Oset is "entitled to receive from the
business opportunity seller [IBS] all sums paid to the business opportu-
nity seller." N.C. Gen. Stat. § 66-100(a). BOSA’s language does not indi-
cate that IBS is entitled to an offset for any net earnings Oset might have
realized from his work in the coffee service business.