Rizoti v. Plemmons , 91 F. App'x 793 ( 2003 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
STEPHEN B. RIZOTI; GREGORY H. 
PLEMMONS,
Plaintiffs-Appellants,
v.  No. 03-1159
HAROLD PLEMMONS,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of North Carolina, at Statesville.
Richard L. Voorhees, District Judge.
(CA-01-160-5-V)
Argued: September 25, 2003
Decided: December 5, 2003
Before WILKINS, Chief Judge, and WIDENER and
LUTTIG, Circuit Judges.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Christopher D. Lane, MCELWEE LAW FIRM, P.L.L.C.,
North Wilkesboro, North Carolina, for Appellants. Cynthia
Van Horne McNeely, POYNER & SPRUILL, L.L.P., Charlotte,
North Carolina, for Appellee. ON BRIEF: William H. McElwee, III,
MCELWEE LAW FIRM, P.L.L.C., North Wilkesboro, North Caro-
lina, for Appellants. E. Fitzgerald Parnell, III, POYNER & SPRUILL,
L.L.P., Charlotte, North Carolina, for Appellee.
2 RIZOTI v. PLEMMONS
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Stephen B. Rizoti (Rizoti) and Gregory H. Plemmons (Plemmons)
(collectively, "Plaintiffs") appeal a district court order granting sum-
mary judgment against them in their action against Harold Plemmons
("Defendant"), arising from an alleged breach of an agreement to
form a business. Finding no error, we affirm.
I.1
Defendant is the founder and former president of Golden Needles
Knitting, Inc. (Golden Needles), a North Carolina glove manufactur-
ing company. In April 1997, Defendant sold the company to Ansell
Protective Products, Inc. (Ansell). In conjunction with the sale,
Defendant signed a noncompete agreement, under which he was to
receive $6.8 million plus interest at the expiration of a three-year non-
compete period.
Rizoti was employed by Golden Needles from 1992 to 1997 and
subsequently by Ansell. Defendant approached Rizoti in early 1998
about founding a new glove business in Wilkes County, North Caro-
lina. Rizoti was receptive to the idea, and Defendant subsequently
asked him to produce a business plan for the new business. In the
months that followed, Defendant advised Rizoti regarding revisions
to the plan and, in June 1999, directed Rizoti to discuss their plan
with Charlie Drum, another Ansell employee. Defendant also encour-
aged Rizoti to invite Plemmons, who is Defendant’s nephew and who
had worked in the glove industry in various capacities since 1989, to
become involved in the new business.
1
Because the district court granted summary judgment against Plain-
tiffs, we view the forecasted evidence in the light most favorable to them.
See Figgie Int’l, Inc. v. Destileria Serralles, Inc., 190 F.3d 252, 255 (4th
Cir. 1999).
RIZOTI v. PLEMMONS 3
In October 1999, at Defendant’s Florida home, Plaintiffs and
Defendant reached an oral agreement to go into business together.
Under the agreement, Rizoti, Plemmons, and Defendant would each
be one-third owners; Rizoti and Plemmons would manage the compa-
ny’s day-to-day business; and Defendant would contribute the $6.8
million plus three years of interest that he expected to receive from
his noncompete agreement. As part of the agreement, Defendant also
promised to serve as company president; "to contribute his skill,
knowledge, experience and contacts in the glove manufacturing busi-
ness to the new business"; "to be involved in all large business mat-
ters, entertain the larger business customers, attend all the national
shows, and participate in negotiating contracts for the new business";
to "be an integral part of the new business’ marketing and manage-
ment team"; and "to use his leverage in the glove industry to help the
success of the new business." J.A. 10-11.
On November 18, 1999, Plaintiffs incorporated the business as
"Platinum Protective Products, Inc." (Platinum). Soon thereafter, they
left their respective jobs to work for Platinum full-time. Plaintiffs
obtained $1,000,000 in startup financing from Ralph and Mark
Atwood, through the Atwoods’ company, the Red Steer Glove Com-
pany. And, as part of an effort to maintain the appearance that Defen-
dant was not yet involved in the business—and thus, not competing
with Ansell—Plaintiffs entered into a formal shareholder agreement
with the Atwoods stating that the Atwoods owned 40 percent of Plati-
num, and Plaintiffs each owned 30 percent.
In the months that followed, Defendant continued to advise Plain-
tiffs on many topics relating to Platinum and even personally
recruited some employees. Throughout this time, Defendant repeat-
edly reassured Plaintiffs that he would perform as promised when his
noncompete agreement expired. On April 25, 2000, the day after the
expiration of the noncompete agreement, Drum called Rizoti and told
him that Defendant would soon have the money from the noncompete
agreement. However, Drum also told Rizoti that Defendant would
never become a part of Platinum. Still, when Rizoti called Defendant
the next morning and asked him about Drum’s assertion, Defendant
insisted that Drum did not speak for him.
By June 2000, although Defendant continued to reassure Plaintiffs
that he would soon be joining them as planned, he still had not pro-
4 RIZOTI v. PLEMMONS
duced the capital for Platinum. On June 15, Defendant discussed with
the Atwoods the possibility of purchasing their Platinum shares;
although the Atwoods were generally receptive, the parties failed to
reach an agreement. At the conclusion of this meeting, Defendant
asked Rizoti for Platinum’s current financial statements and its sales
and profit projections. And, Defendant again confirmed that he would
soon be involved with the company. Five days later, however, he
informed Plaintiffs that he would neither make the capital contribu-
tion he had promised nor become a part of Platinum. As a result,
Plaintiffs’ shares of Platinum lost all value.
Plaintiffs subsequently sued Defendant in North Carolina Superior
Court for breach of contract, breach of fiduciary duty, ‘constructive
fraud, and violation of the North Carolina Unfair and Deceptive Trade
Practices Act (UTPA), see N.C. Gen. Stat. § 75-1.1 (2001). Defendant
removed the suit to the Western District of North Carolina, where the
district court granted summary judgment to Defendant on all causes
of action.
II.
We review the grant of summary judgment de novo, viewing the
facts in the light most favorable to Plaintiffs. See Figgie Int’l, Inc. v.
Destileria Serralles, Inc., 190 F.3d 252, 255 (4th Cir. 1999). Sum-
mary 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 the moving party is entitled to a judgment as a matter of law."
Fed. R. Civ. P. 56(c).
A.
Plaintiffs first contend that the district court erred in ruling that the
contract claim was barred by the Florida statute of frauds.2 We dis-
agree.
2
Plaintiffs also challenge the alternative ruling that the alleged contract
was unenforceable because there was no meeting of the minds among the
parties on the issue of how and at what price Defendant would obtain a
third of the company. In light of our holding regarding the statute of
frauds, we do not address this issue.
RIZOTI v. PLEMMONS 5
Plaintiffs begin by arguing that the law of North Carolina, not that
of Florida, applies to the contract claim because the contract was to
be performed in North Carolina. That is incorrect. Under North Caro-
lina choice of law rules, which the parties agree govern this issue, the
validity and interpretation of a contract is generally governed by the
law of the state in which the contract was formed. See Tanglewood
Land Co. v. Byrd, 261 S.E.2d 655, 656 (N.C. 1980). However, the
general rule does not apply when "a contract is to be performed
wholly outside the state in which the contract was made." Cocke v.
Duke Univ., 131 S.E.2d 909, 913 (N.C. 1963) (emphasis added)
(internal quotation marks omitted). In that circumstance, the law of
the place of performance governs. See id. In their complaint and in
their deposition testimony, Plaintiffs assert that Defendant had no
intention of running Platinum’s day-to-day operations in North Caro-
lina, that the first national trade show Defendant was to attend for
Platinum was in Florida, and that Defendant was to entertain Platinum
customers at his Florida home. Thus, the record establishes as a mat-
ter of law that Defendant’s performance was not to take place wholly
outside of the state of formation, Florida. Florida law therefore gov-
erns the contract.
Plaintiffs also argue that even if Florida law applies, the contract
claim is not barred by the statute of frauds because the contract was
capable of being performed within a year. Under Fla. Stat. Ann.
§ 725.01 (West 2000), "[n]o action shall be brought . . . upon any
agreement that is not to be performed within the space of 1 year from
the making thereof . . . unless the agreement or promise upon which
such action [is] brought . . . [is] in writing and signed by the party to
be charged."
[W]hen no time is agreed on for the complete performance
of the contract, if from the object to be accomplished by it
and the surrounding circumstances, it clearly appears that
the parties intended that it should extend for a longer period
than a year, it is within the statute of frauds, though it cannot
be said that there is any impossibility preventing its perfor-
mance within a year.
Yates v. Ball, 181 So. 341, 344 (Fla. 1937).
6 RIZOTI v. PLEMMONS
Here, Plaintiffs’ argument that the contract claim is not barred by
the Florida statute of frauds might succeed if we focused only on
Defendant’s obligation to contribute financially to the company.
However, Plaintiffs have alleged in their complaint and depositions
that Defendant also agreed to make extensive use of his personal
skills, experience, and contacts. Moreover, in their respective deposi-
tions, Plemmons testified that he had anticipated doing business with
Defendant for "[a] number of years," and Rizoti had anticipated that
Defendant’s participation would last "five years at an absolute mini-
mum." J.A. 92, 117. Thus, it is clear that the parties intended that
Defendant’s performance would extend beyond one year.
Plaintiffs also argue that the Florida statute of frauds does not bar
their contract claim because the contract was to enter into a joint ven-
ture and "[j]oint venture agreements are not required to be in writing,"
De Ribeaux v. Del Valle, 531 So. 2d 992, 993 (Fla. Dist. Ct. App.
1988). A "joint venture" is defined as "a special combination of two
or more persons, who, in some specific venture, seek a profit jointly
without the existence between them of any actual partnership, corpo-
ration, or other business entity." Fla. Trading & Inv. Co. v. River
Constr. Servs., 537 So. 2d 600, 602 (Fla. Dist. Ct. App. 1988) (inter-
nal quotation marks omitted). A joint venture "is limited to a specific
enterprise or object." Hayes v. H.J.S.B.B. Joint Venture, 595 So. 2d
1000, 1002 (Fla. Dist. Ct. App. 1992).
Here, the alliance the parties allegedly sought to form was not
merely for some particular enterprise or object. Rather, the agreement
was to form a business that would have continued for an indefinite
duration. See Kislak v. Kreedian, 95 So. 2d 510, 514 (Fla. 1957)
(explaining that the term "joint adventure" refers "to a single transac-
tion" but not "to a general and continuing business of a particular
kind"); Weinsier v. Soffer, 358 So. 2d 61, 63 (Fla. Dist. Ct. App.
1978) (holding that "[a]n oral agreement to enter into a new business
which will continue indefinitely" is unenforceable under the statute of
frauds); see also Bross v. Wallace, 600 So. 2d 1198, 1199 (Fla. Dist.
Ct. App. 1992) (per curiam) (stating that enforcement of an oral
agreement to purchase a restaurant and franchise rights and "establish
an ongoing business" would be barred by the statute of frauds). Thus,
Plaintiffs have failed to create a genuine issue of fact regarding
whether the parties contracted to enter into a joint venture.
RIZOTI v. PLEMMONS 7
Plaintiffs further maintain that even if the statute of frauds would
otherwise bar their contract claim, Defendant is equitably estopped
from contesting the validity of his agreement by virtue of Defendant’s
repeated confirmations that he would become involved in the business
and infuse it with his capital. In rejecting the estoppel argument, the
district court properly relied upon Tanenbaum v. Biscayne Osteo-
pathic Hosp., Inc., 190 So. 2d 777 (Fla. 1966), in which the Florida
Supreme Court declined to "adopt by judicial action the doctrine of
promissory estoppel as a sort of counteraction to the legislatively cre-
ated Statute of Frauds." Tanenbaum, 190 So. 2d at 779. This reason-
ing controls here, and there is no indication that the Florida Supreme
Court would abandon that analysis were it presented with the facts
before us. In support of their argument that the district court erred,
Plaintiffs rely not on a subsequent Florida Supreme Court case, but
only on a lower court opinion that did not cite Tanenbaum and that
the Florida Supreme Court never reviewed. See Gleason v. Leader-
ship Housing, Inc., 327 So. 2d 101, 104-05 (Fla. Dist. Ct. App. 1976).
The district court therefore properly ruled that the contract claim was
barred by the Florida statute of frauds. See Doe v. Doe, 973 F.2d 237,
240 (4th Cir. 1992) (explaining that the function of this court in a
diversity case is to resolve the state law issues as we predict the high-
est court in the state would).
B.
Plaintiffs also maintain that the district court erred in granting sum-
mary judgment on their constructive fraud and breach of fiduciary
duty claims. We disagree.
The parties agree that North Carolina law governs these causes of
action. In order to prove constructive fraud, a plaintiff must prove the
existence of a fiduciary duty. See Keener Lumber Co. v. Perry, 560
S.E.2d 817, 823 (N.C. Ct. App.), review denied, 568 S.E.2d 196 (N.C.
2002). A fiduciary duty arises when "there has been a special confi-
dence reposed in one who in equity and good conscience is bound to
act in good faith and with due regard to the interests of the one repos-
ing confidence." Curl v. Key, 316 S.E.2d 272, 275 (N.C. 1984) (inter-
nal quotation marks omitted). No such duty arises from a mere
contractual relationship. See Branch Banking & Trust Co. v. Thomp-
son, 418 S.E.2d 694, 699 (N.C. Ct. App. 1992).
8 RIZOTI v. PLEMMONS
Plaintiffs maintain that a fiduciary duty arises between parties to a
joint venture and that the district court erred in holding as a matter of
law that Plaintiffs and Defendant were not joint venturers. For the rea-
sons we have already discussed, however, we hold that the district
court correctly ruled as a matter of law that Plaintiffs and Defendant
were not joint venturers.
Plaintiffs also argue that their view of Defendant as "the most
respected person . . . in the glove industry" and Plemmons’ nephew-
uncle relationship with Defendant gave rise to a fiduciary duty. J.A.
395. Although Plaintiffs’ experience was not as extensive as Defen-
dant’s, the gap was certainly not so great as to give rise to a fiduciary
duty. See Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d
331, 348 (4th Cir. 1998) (holding no fiduciary duty arose under North
Carolina law between franchisor and franchisees because franchisees
were "independent, sophisticated, if sometimes small, businessmen
who dealt with [the defendant] at arms’ length and pursued their own
business interests"). Indeed, Plemmons testified that, within the glove
industry, he and Rizoti "were known as folks that knew what [they]
were doing." J.A. 243. Nor was the fact that Defendant was Plem-
mons’ uncle sufficient to create a fiduciary relationship. See Benfield
v. Costner, 313 S.E.2d 203, 205 (N.C. Ct. App. 1984) (holding that
"a ‘mere family relationship’ is not . . . enough to establish a . . . fidu-
ciary relationship"). Thus, the district court properly granted summary
judgment against Plaintiffs on these causes of action.
C.
Plaintiffs next argue that the district court erred in granting sum-
mary judgment against them on the UTPA claim. We disagree.
To state a UTPA claim, Plaintiffs must allege and show "(1) that
defendant committed an unfair or deceptive act or practice, or an
unfair method of competition; (2) in or affecting commerce; (3) which
proximately cause[d] actual injury to plaintiff[s]." B & F Slosman v.
Sonopress, Inc., 557 S.E.2d 176, 182 (N.C. Ct. App. 2001), review
denied, 560 S.E.2d 795 (N.C. 2002). "A practice is unfair when it
offends established public policy as well as when the practice is
immoral, unethical, oppressive, unscrupulous, or substantially injuri-
ous to consumers." Marshall v. Miller, 276 S.E.2d 397, 403 (N.C.
RIZOTI v. PLEMMONS 9
1981). In a business context, "[i]t is well established that a mere
breach of contract, even if intentional, is not sufficiently unfair or
deceptive to sustain an action" under § 75-1.1. Computer Decisions,
Inc. v. Rouse Office Mgmt. of N.C., Inc., 477 S.E.2d 262, 266 (N.C.
Ct. App. 1996). To sustain a cause of action, Plaintiffs are required
to allege and prove that "substantial aggravating circumstances"
attended the breach. Id. Indeed, in any context, some kind of "egre-
gious or aggravating circumstances must be alleged and proved
before the Act’s provisions may take effect." Dalton v. Camp, 548
S.E.2d 704, 711 (N.C. 2001) (alterations & internal quotation marks
omitted). Additionally, when a UTPA claim is based on alleged mis-
representations, the plaintiff must show that the misrepresentations
complained of proximately caused them actual injury. See Barto-
lomeo v. S.B. Thomas, Inc., 889 F.2d 530, 535 (4th Cir. 1989) (apply-
ing North Carolina law); Mosley & Mosley Bldrs., Inc. v. Landin Ltd.,
389 S.E.2d 576, 579 (N.C. Ct. App. 1990).
Plaintiffs contend that Defendant committed unfair or deceptive
acts not simply by intentionally breaching the contract, but rather, by
also repeatedly reassuring them of his continued commitment after
the contract was formed. However, Plaintiffs have failed to forecast
evidence establishing a prima facie UTPA case as to either the initial
assent to the agreement or the subsequent reassurances. With regard
to the initial assent, Plaintiffs have not shown that Defendant intended
to renege on his promises when he made them; thus, they have failed
to show that his formation of the agreement was deceptive. Cf. Pro-
cess Components, Inc. v. Baltimore Aircoil Co., 366 S.E.2d 907, 911
(N.C. Ct. App.) (holding that defendant-manufacturer’s acts were suf-
ficiently deceptive when defendant promised plaintiff an exclusive
distributorship while defendant was still bound to agreement with
another distributor), aff’d, 374 S.E.2d 116 (N.C. 1988) (per curiam).
It might be argued that it could be inferred from Drum’s telephone
call to Rizoti in late April 2000 that Defendant had decided by that
time not to fulfill his obligations. However, even assuming that to be
true, Plaintiffs have failed to forecast evidence that Defendant’s reas-
surance at that late date proximately caused them any injury. The dis-
trict court therefore properly granted summary judgment against
Plaintiffs on the UTPA claim.
10 RIZOTI v. PLEMMONS
III.
In sum, for the foregoing reasons, the district court properly
granted summary judgment to Defendant on all causes of action.
AFFIRMED