Gray v. Riso Kagaku Corp ( 1996 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
CHARLES R. GRAY,
Plaintiff-Appellant,
v.
No. 95-1741
RISO KAGAKU CORPORATION, RISO,
INCORPORATED,
Defendants-Appellees.
Appeal from the United States District Court
for the District of South Carolina, at Columbia.
Dennis W. Shedd, District Judge.
(CA-92-1190)
Argued: January 31, 1996
Decided: April 17, 1996
Before RUSSELL and HAMILTON, Circuit Judges, and BLAKE,
United States District Judge for the District of Maryland,
sitting by designation.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
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COUNSEL
ARGUED: T. English McCutchen, III, MCCUTCHEN, BLANTON,
RHODES & JOHNSON, Columbia, South Carolina, for Appellant.
Milton D. Andrews, THOMPSON & MITCHELL, Washington, D.C.,
for Appellees. ON BRIEF: William E. Hopkins, Jr., MCCUTCHEN,
BLANTON, RHODES & JOHNSON, Columbia, South Carolina, for
Appellant. Halpin J. Burke, THOMPSON & MITCHELL, Washing-
ton, D.C., for Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Charles R. Gray (Gray) brought this action against Riso Kagaku
Corporation (Riso Kagaku) and Riso, Inc. (Riso-USA), alleging
causes of action for breach of contract, breach of the South Carolina
Unfair Trade Practices Act, conversion, and fraud. The district court
dismissed all causes of action against Riso Kagaku for lack of per-
sonal jurisdiction and granted summary judgment as to all causes of
action in favor of Riso-USA. Gray appeals both the dismissal in favor
of Riso Kagaku and the grant of summary judgment in favor of Riso-
USA. We affirm.
I.
Riso Kagaku, a Japanese corporation, makes office machines.
Riso-USA, a Massachusetts corporation wholly owned by Riso
Kagaku, markets Riso Kagaku's office machines in the United States.
On June 26, 1987, Riso-USA entered into a written dealer agreement
(the Dealer Agreement) with RGI, Inc.,1 a South Carolina corporation.
RGI, Inc. was owned by three individuals. Gray owned 47.5%,
Michael Randall owned 47.5%, and Danny Allen owned 5%. Pursu-
ant to the Dealer Agreement, RGI, Inc. became an authorized dealer
of certain Riso products.2
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1 RGI, Inc.'s name was later changed to "Riso Products of South Caro-
lina, Inc."
2 Later, Riso-USA also entered into a written dealer agreement with
RGI South, Inc. (later known as "Riso Products of Florida, Inc."), a
wholly owned subsidiary of RGI, Inc. Hereafter, RGI, Inc. and RGI
South, Inc. will be referred to collectively a "RGI."
2
By November 1988, as a result of purchasing inventory from Riso-
USA on credit, RGI owed Riso-USA approximately $600,000. In
December 1988, Riso-USA sent a memorandum to all dealers stating
that finance charges would accrue on delinquent account balances and
that Riso-USA would not deliver supplies, parts, and machines to
dealers with delinquent account balances until the delinquent account
balances were paid off. Accordingly, because RGI's account with
Riso-USA was delinquent, Riso-USA refused to deliver supplies,
parts, and machines to RGI. The Dealer Agreement authorized Riso-
USA to take these actions.
On February 28, 1989, Riso-USA made a proposal to purchase the
stock of RGI. On March 1, 1989, Gray responded to the proposal by
stating that he would like to make a counter-proposal. The following
day, RGI received a fax from Riso-USA, terminating the Dealer
Agreement as of March 13, 1989. The Dealer Agreement authorized
termination because RGI had a seriously delinquent account with
Riso-USA. Riso-USA also informed RGI that Riso-USA would pur-
sue legal action to collect RGI's delinquent account balance. Gray,
Randall, and Riso-USA then began negotiating an agreement under
which Gray and Randall would sell their stock in RGI to Riso-USA.
Both Gray and Randall were represented by counsel during the nego-
tiations.
Gray, Randall, and Riso-USA executed an agreement (the Sale
Agreement), dated April 25, 1989, under which Gray and Randall
would sell their stock in RGI to Riso-USA for a total of $1.00 each.
The Sale Agreement provided, among other things, that: (1) RGI's
debt to Riso-USA would be converted to a long-term note; (2) Riso-
USA would provide RGI with a general business manager; (3) Gray
and Randall would continue as RGI employees, receiving annual sala-
ries of $75,000 plus a percentage of profits; (4) Gray and Randall
could be terminated only for cause; and (5) Gray and Randall would
have access to all the books and records of RGI. Finally, the Sale
Agreement contained a Repurchase Option giving Gray and Randall
the option to repurchase all the stock of RGI for $1.00 by May 1,
1992, provided: (1) Gray and Randall repaid their loans from RGI; (2)
RGI paid its debts to Riso-USA; (3) RGI had a positive net worth and
a positive current assets to current liabilities ratio; (4) the purchaser
was employed by RGI at the time of exercising the Repurchase
3
Option; and (5) RGI paid a buy-back premium of approximately
$400,000 to Riso-USA. Allen then transferred his 5% of stock in RGI
to Riso-USA without consideration. Randall subsequently entered
into an agreement with Riso-USA terminating his employment with
RGI.
On October 18, 1990, Gray and Riso-USA executed an agreement
amending the Sale Agreement (the Amendment). The Amendment
extended the period in which Gray could exercise the Repurchase
Option to May 1, 1994, and waived the condition that RGI pay the
buy-back premium of approximately $400,000 to Riso-USA. On the
same day, in consideration for the Amendment, Gray executed a
"General Release" releasing "any and all legal and equitable claims
he may have against [Riso-USA], or Riso Kagaku Corporation, sepa-
rately or jointly, arising from any acts or omissions which occurred
on or before the date of this General Release." (J.A. 761).
Thereafter, relations soured between Gray and Riso-USA and the
protracted litigation culminating in this appeal began. On May 6,
1991, Gray and RGI brought a declaratory judgment action against
Riso-USA and Riso Kagaku. And on April 24, 1992, Gray filed his
original complaint in this action. He subsequently amended the com-
plaint three times, filing the present version of the complaint on June
28, 1994. The present version of the complaint alleges causes of
action against Riso-USA and Riso Kagaku for: (1) breach of contract,
(2) breach of contract accompanied by a fraudulent act, (3) breach of
the implied covenant of good faith and fair dealing, (4) breach of
fiduciary duty, (5) conversion, (6) breach of the South Carolina
Unfair Trade Practices Act, (7) fraud, (8) constructive fraud, (9) tor-
tious interference with a business relationship, and (10) intentional
interference with a contract. Gray later withdrew with prejudice his
declaratory judgment action and his causes of action for tortious inter-
ference with a business relationship and intentional interference with
a contract. The district court then dismissed Gray's causes of action
against Riso Kagaku for lack of personal jurisdiction and granted
summary judgment in favor of Riso-USA on Gray's remaining causes
of action. This appeal followed.
II.
Gray first argues that the district court erred in dismissing his
causes of action against Riso Kagaku for lack of personal jurisdiction.
4
Gray, the party asserting that personal jurisdiction exists, bears the
burden of establishing that personal jurisdiction exists. See Mylan
Labs., Inc. v. Azko, N.V., 2 F.3d 56, 60 (4th Cir. 1993). To establish
personal jurisdiction over Riso Kagaku, Gray must show: (1) that a
statute authorizes service of process on Riso Kagaku, and (2) that
exercising personal jurisdiction over Riso Kagaku would comport
with due process. See id.; see also Fed. R. Civ. P. 4(e).
To make the first showing, Gray relies on the South Carolina long-
arm statute, S.C. Code Ann. § 36-2-803. Riso Kagaku concedes that
the South Carolina long-arm statute extends to the limits of due pro-
cess. See Southern Plastics Co. v. Southern Commerce Bank, 423
S.E.2d 128, 130 (S.C. 1992).
Because Riso Kagaku concedes that the South Carolina long-arm
statute extends to the limits of due process, Gray must only show that
exercising jurisdiction over Riso Kagaku comports with due process.
The due process standard has two prongs: (1) the minimum contacts
prong and (2) the fairness prong. To satisfy the minimum contacts
prong, the defendant must have certain minimum contacts or ties with
the forum state. To satisfy the fairness prong, the exercise of personal
jurisdiction over the defendant must not "offend traditional notions of
fair play and substantial justice." Lesnick v. Hollingsworth & Vose
Co., 35 F.3d 939, 942 (4th Cir. 1994), cert. denied, 115 S. Ct. 1103(1995).
The minimum contacts prong focuses on whether the defendant
"has created a substantial connection to the forum state by action pur-
posefully directed toward the forum state or otherwise invoking the
benefits and protections of the laws of the state." Id. at 945-46. Gray
argues that Riso Kagaku had the requisite minimum contacts with
South Carolina because Riso Kagaku's wholly owned subsidiaries
marketed Riso Kagaku's products in South Carolina. But the mere
fact that Riso Kagaku's subsidiaries do business in South Carolina
does not confer personal jurisdiction over Riso Kagaku. See Cannon
Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 335-38 (1925);
Transure, Inc. v. Marsh & McLennan, Inc., 766 F.2d 1297, 1299 (9th
Cir. 1985); Yarborough & Co. v. Schoolfield Furniture Indus., Inc.,
268 S.E.2d 42, 44 (S.C. 1980); see also Donatelli v. National Hockey
League, 893 F.2d 459, 466 (1st Cir. 1990) (requiring more than the
5
sharing of directors or other forms of control inherent in the par-
ent/subsidiary relationship to exercise personal jurisdiction over a par-
ent corporation based on its subsidiary's contacts with the forum
state). And the marketing of Riso Kagaku's products in South Caro-
lina does not provide a basis for exercising personal jurisdiction over
Riso Kagaku. See Lesnick, 35 F.3d at 944 (rejecting the proposition
that personal jurisdiction may be exercised over a manufacturer who
merely delivers its products into the stream of commerce with the
expectation that the products will be purchased by consumers in the
forum state).
Additionally, Gray argues that the district court should have exer-
cised personal jurisdiction over Riso Kagaku by piercing Riso-USA's
corporate veil. He points to the following evidence in the record to
support this argument: (1) Riso Kagaku funded Riso-USA and gave
it infusions of cash and at least part of the purpose of the cash infu-
sions was to gain favorable tax treatment for Riso Kagaku in Japan;
(2) at least one board of directors meeting was held in Tokyo; (3)
notices of board of directors meetings may have originated in Japan;
(4) Riso-USA did not regularly hold formal board of directors meet-
ings, relying instead on informal consultation; (5) a majority of the
members of Riso-USA's board of directors were also associated with
Riso Kagaku; (6) Riso Kagaku forced Riso-USA to terminate a
financing program on which Riso Kagaku acted as guarantor; (7) the
president of Riso-USA sought approval from Riso Kagaku officials
before hiring a financial controller, although the president believed he
had the authority to hire the financial controller without Riso
Kagaku's consent; and (8) Riso-USA forwarded certain complaints
made by Gray to officials in Japan and received a response on Riso
Kagaku letterhead indicating that Riso Kagaku's approval was
required for resolving the complaints.
Although these facts demonstrate that Riso-USA failed to observe
some corporate formalities, Gray has not sustained his burden of
proving that Riso Kagaku has minimum contacts with South Carolina.
For example, he has not proved that Riso-USA was an agent of Riso
Kagaku, that Riso Kagaku exerts a degree of control greater that what
is normally associated with common ownership and directorship, or
that Riso-USA is a separate entity in name alone. Donatelli, 893 F.2d
at 466. We thus conclude that Gray has not established that Riso
6
Kagaku had sufficient minimum contacts with South Carolina to sat-
isfy the due process standard for the exercise of personal jurisdiction.
We also conclude that Gray cannot satisfy the fairness prong of the
due process standard. Under the fairness prong, a court must consider
several factors, including the interests of the plaintiff and of the forum
state and the burden on the defendant of having to defend the case in
the forum state. Id. at 946. When personal jurisdiction over an alien
defendant is at issue, a court must also consider the procedural and
substantive policies of other nations whose interests are affected by
the assertion of jurisdiction by a court in the United States. Asahi
Metal Indus. Co. v. Superior Court of California, 480 U.S. 102, 115
(1987).
Here, consideration of these factors leads to the conclusion that
exercising personal jurisdiction over Riso Kagaku would "offend tra-
ditional notions of fair play and substantial justice." See Lesnick, 35
F.3d at 942. Although Gray has an interest in adjudicating this action
in his home state, South Carolina, and South Carolina has an interest
in providing a forum for one of its citizens, these interests are out-
weighed by the burden on Riso Kagaku in having to defend this
action in South Carolina. The distance between Japan and South Car-
olina makes travel here expensive. Additionally, Riso Kagaku would
be at a disadvantage in South Carolina because of language and cul-
tural barriers. See Asahi, 480 U.S. at 115 ("The unique burdens placed
upon one who must defend oneself in a foreign legal system should
have significant weight in assessing the reasonableness of stretching
the long arm of personal jurisdiction over national borders."). The
Supreme Court has admonished courts to demonstrate"an unwilling-
ness to find the serious burdens on an alien defendant outweighed by
minimal interests on the part of the plaintiff or the forum State." Id.Accordingly, we hold that exercising personal jurisdiction over Riso
Kagaku would violate the fairness prong of the due process standard.
III.
Having determined that the district court properly dismissed the
causes of action against Riso Kagaku, we now consider the propriety
of the district court's grant of summary judgment in favor of Riso-
USA. We review the grant of summary judgment de novo. See Cooke
7
v. Manufactured Homes, Inc., 998 F.2d 1256, 1260 (4th Cir. 1993).
Summary judgment must be entered against a party who, "after ade-
quate time for discovery . . . fails to make a showing sufficient to
establish the existence of an element essential to that party's case, and
on which that party will bear the burden of proof at trial." Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986); see Fed. R. Civ. P. 56(c).
The nonmoving party must demonstrate that specific, material facts
exist that give rise to a genuine issue. See Celotex Corp., 477 U.S. at
324. "The nonmoving party, however, cannot create a genuine issue
of material fact through mere speculation or the building of one infer-
ence upon another." Beale v. Hardy, 769 F.2d 213, 214 (4th Cir.
1985). Furthermore, the existence of a scintilla of evidence in support
of the nonmoving party's position is insufficient. There must be evi-
dence on which the jury could reasonably find for the nonmoving
party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
A.
Before we address each of Gray's causes of action against Riso-
USA, we note at the outset that some of Gray's claims are barred by
the General Release. The General Release executed by Gray on Octo-
ber 18, 1990, states, "Charles Gray hereby releases any and all legal
and equitable claims he may have against [Riso-USA], or Riso
Kagaku Corporation, separately or jointly, arising from any acts or
omissions which occurred on or before the date of this General
Release." (J.A. 761). The plain language of the General Release pre-
cludes Gray from recovering from Riso-USA for any wrong commit-
ted by Riso-USA on or before October 18, 1990. See Jordan v.
Security Group, Inc., 428 S.E.2d 705, 707 (S.C. 1993) ("Where the
language of a contract is plain and capable of legal construction, that
language alone determines the instrument's force and effect.").3
Although Gray contends that the General Release was only intended
to release certain specific claims, the language of the General Release
does not admit of such limitation.4 It is therefore our duty to "enforce
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3 There is no dispute that South Carolina law applies to this case.
4 Gray also argues that the General Release was not fairly obtained. He
relies on a memorandum written by the president of Riso-USA three
months before the General Release was executed, stating that Gray was
8
the contract made by the parties regardless of its wisdom or folly,
apparent unreasonableness, or the parties' failure to guard their rights
carefully." Id. Thus, to the extent that Gray's claims against Riso-
USA are based on conduct that occurred on or before October 18,
1990, summary judgment was properly granted on those claims.
B.
Gray asserts that Riso-USA breached the Sale Agreement and the
Amendment in the following particulars: (1) failing to provide RGI
with a general business manager; (2) failing to allow Gray to repur-
chase the stock in RGI; (3) failing to make available to RGI a special
type of financing that was available to all other dealers; and (4) failing
to give RGI the special pricing reserved for Riso-only dealers. We
shall address these arguments in turn.
1.
Gray argues that Riso-USA breached Paragraph 5(b) of the Sale
Agreement, which states that Riso-USA "will provide RGI with a
general business manager who will act as chief executive officer and
chief financial officer regardless of whether such person carries either
or both of those titles." (J.A. 724). Although the Sale Agreement was
executed on May 11, 1989, Riso-USA did not appoint a general busi-
ness manager for RGI until June 1991.
In South Carolina, no cause of action for breach of contract arises
unless the breach caused damage to the plaintiff. Baughman v. South-
ern Ry., 121 S.E. 356, 356 (S.C. 1924). Here, Gray has failed to dem-
onstrate that Riso-USA's delay in appointing a general business
manager caused him any injury. See Celotex Corp. , 477 U.S. at 324
(holding that summary judgment is appropriate against a party who,
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concerned that he would be unable to exercise the Repurchase Option
within the time provided for its exercise in the Sale Agreement. At most,
this memorandum provides evidence of Gray's motivation for executing
the General Release, i.e., to obtain an extension of time to exercise the
Repurchase Option. By no means does it show that the General Release
was not fairly obtained.
9
"after adequate time for discovery . . . fails to make a showing suffi-
cient to establish the existence of an element essential to that party's
case, and on which that party will bear the burden of proof at trial").
Indeed, the record demonstrates that Gray was not injured by Riso-
USA's delay in appointing a general business manager. Before the
appointment of the general business manager, Riso-USA officials per-
formed the functions that a general business manager would perform.
The president of Riso-USA told Gray that Riso-USA was having dif-
ficulty hiring a general business manager, that the salary for a general
business manager was an expense that RGI could ill afford, and that,
therefore, the president of Riso-USA would act as"de facto" general
business manager. Gray admits that this arrangement"was fine with"
him. (J.A. 1105). Summary judgment in favor of Riso-USA was
appropriate on this breach of contract claim because Gray failed to
establish the existence of injury resulting from the breach.
2.
Gray also argues that Riso-USA breached Paragraph 6 of the Sale
Agreement (the Repurchase Option), which gives Gray an option to
repurchase RGI if, among other things, "[a]ll RGI debts, long term or
current, to Riso[-USA] shall have been paid in full" and "RGI shall
have a positive net worth and a positive current assets to current lia-
bilities ratio." (J.A. 726). Gray argues that Riso-USA prevented him
from exercising this Repurchase Option.
To support his argument that Riso-USA prevented him from exer-
cising the Repurchase Option, Gray relies on a series of letters
between his attorney and Riso-USA's attorney. Examination of these
letters does not show that Riso-USA prevented Gray's exercise of the
Repurchase Option. Rather, the letters show that the parties were
attempting to settle the ongoing litigation between the parties and to
determine the amount due under the Repurchase Option. In determin-
ing the amount due under the Repurchase Option, each party sought
offsets and credits for various expenses for which they claimed the
other party was responsible. The offsets and credits sought by each
party were not specifically authorized in the Sale Agreement or in the
Amendment, and neither party would agree to the offsets and credits
sought by the other party. Consequently, the parties failed to reach an
10
agreement. Because an examination of these letters reveals no genu-
ine issue regarding Gray's allegation that Riso-USA prevented his
exercise of the Repurchase Option, summary judgment in favor of
Riso-USA was appropriate on this breach of contract claim.
3.
Gray argues that Riso-USA breached Paragraph 5(a) of the Sale
Agreement, which states that RGI's debts to Riso-USA will be "on
standard terms as stated by Riso[-USA] for all dealers." (J.A. 724).
Gray claims that Riso-USA refused to allow RGI to purchase its
inventory under a particular financing plan, the"ORIX" plan. How-
ever, Riso-USA terminated the ORIX plan as to all dealers, including
RGI, in the summer of 1990. Gray does not claim that Riso-USA
refused to allow RGI to purchase its inventory under the ORIX plan
before it terminated the plan as to all dealers. Because no dealer could
use the ORIX plan, Riso-USA's failure to allow RGI to use the ORIX
plan did not breach the Sale Agreement's requirement that RGI's
debts to Riso-USA would be on standard terms applicable to all deal-
ers. Therefore, summary judgment in favor of Riso-USA was appro-
priate regarding this breach of contract claim.
4.
Finally, Gray also argues that for a period of time preceding the
execution of the General Release, Riso-USA breached Paragraph 5(a)
of the Sale Agreement by failing to give RGI special"Riso-only"
pricing that is given to all dealers who sell Riso products exclusively.
Because the acts or omissions from which this claim arises occurred
before October 18, 1990, Gray has completely released Riso-USA for
liability resulting from this breach of the Sale Agreement. Therefore,
summary judgment in favor of Riso-USA was appropriate on this
breach of contract claim.
C.
Gray claims that each of the alleged breaches of contract just dis-
cussed were accompanied by fraudulent acts. In South Carolina, the
cause of action for breach of contract accompanied by a fraudulent act
11
has three elements: (1) a breach of contract, (2) fraudulent intent relat-
ing to the breaching of the contract and not merely to its making, and
(3) a fraudulent act accompanying the breach. Floyd v. Country
Squire Mobile Homes, Inc., 336 S.E.2d 502, 503-04 (S.C. Ct. App.
1985).
Gray has waived his argument that Riso-USA's delay in appointing
a general business manager was a breach of contract accompanied by
a fraudulent act. At the summary judgment hearing, Gray's attorney
stated, "As far as fraudulent act accompanying failure to appoint a
business manager, I would not necessarily say that there was one on
that." (J.A. 633). Therefore, we will not consider this argument. See
Muth v. United States, 1 F.3d 246, 250 (4th Cir. 1993) ("[I]ssues
raised for the first time on appeal generally will not be considered.").
As already noted, Riso-USA's alleged prevention of Gray's exer-
cise of the Repurchase Option and Riso-USA's failure to allow RGI
to use the ORIX plan do not constitute breaches of the Sale Agree-
ment or the Amendment. Consequently, as to these claims, Gray can-
not establish the first element of the cause of action for breach of
contract accompanied by a fraudulent act. And, as discussed above,
Gray has released Riso-USA from liability for its failure to give RGI
Riso-only pricing. Therefore, summary judgment in favor of Riso-
USA was appropriate on Gray's cause of action for breach of contract
accompanied by a fraudulent act.
D.
Gray claims that Riso-USA violated the covenants of good faith
and fair dealing in the contracts at issue in this case. In South Caro-
lina, every contract has an implied covenant of good faith and fair
dealing. Commercial Credit Corp. v. Nelson Motors, Inc., 147 S.E.2d
481, 484 (S.C. 1966). This covenant requires the parties to do those
things that according to reason and justice they should do to carry out
the purpose of the contract. Id.Gray alleges the following breaches of the implied covenant of
good faith and fair dealing: (1) Riso-USA frustrated and sabotaged
Gray's exercise of the Repurchase Option; (2) Riso-USA refused to
treat RGI on the same credit terms as other dealers; (3) the president
12
of Riso-USA told Gray that the Sale Agreement and the Amendment
were void; (4) Riso-USA threatened to pursue legal action to collect
funds owed by RGI; (5) Riso-USA placed RGI on credit hold until
Gray acceded to the Sale Agreement; (6) Riso-USA pressured Gray
into purchasing large amounts of unneeded inventory for RGI; (7)
Riso-USA threatened to terminate RGI as a Riso dealership; and (8)
Riso-USA refused to ship supplies necessary to fill an order that RGI
had from a customer.
The first alleged breach--Riso-USA's frustrating and sabotaging
Gray's exercise of the Repurchase Option--refers to the same con-
duct that Gray alleges breached the express terms of the Repurchase
Option, as well as to other generalized allegations of Riso-USA's
mismanagement while it controlled RGI. As discussed above, Gray
cannot point to specific facts in the record supporting these allega-
tions. Therefore, the district court properly granted summary judg-
ment on this claim. See Celotex Corp., 477 U.S. at 324.
The second alleged breach--Riso-USA's refusal to treat RGI on
the same credit terms as other dealers--presumably refers to the same
conduct that Gray alleges breached Paragraph 5(a) of the Sale Agree-
ment. As discussed above, Riso-USA did not violate Paragraph 5(a)
by refusing to allow RGI to use ORIX financing because Riso-USA
refused to allow all dealers to use ORIX financing. And Gray released
Riso-USA from liability for its failure to give RGI Riso-only pricing.
The third alleged breach--the president of Riso-USA telling Gray
that the Sale Agreement and the Amendment were void--is immate-
rial. Riso-USA has not refused to perform under the Sale Agreement
and Amendment. Therefore, even if the president of Riso-USA did
tell Gray that the Sale Agreement and the Amendment were void,
Gray cannot demonstrate that he was injured by this statement. Cf.
Baughman, 121 S.E. at 356 (holding that no cause of action for
breach of contract arises unless the breach causes damage to the
plaintiff).
The remaining alleged breaches refer to the implied covenant of
good faith and fair dealing in the Dealer Agreement between Riso-
USA and RGI. An action on a contract must be brought by the parties
to the contract or their assignees. See Professional Bankers Corp. v.
13
Floyd, 331 S.E.2d 362, 364-65 (S.C. Ct. App. 1985). Because Gray
was not a party to the Dealer Agreement or an assignee of a party to
the Dealer Agreement, Gray is not the proper party to raise these
claims. Therefore, summary judgment in favor of Riso-USA was
appropriate of these claims.
E.
Gray asserts that by virtue of the Sale Agreement, specifically the
Repurchase Option, a fiduciary relationship existed between Riso-
USA and Gray. Gray further asserts that Riso-USA breached its fidu-
ciary duty to him by mismanaging RGI and by preventing him from
exercising the Repurchase Option.
In South Carolina, those who control a corporation owe a fiduciary
duty to the shareholders of the corporation. Jacobson v. Yaschik, 155
S.E.2d 601, 605 (S.C. 1967); see Hite v. Thomas & Howard Co., 409
S.E.2d 340, 342 (S.C. 1991), overruled in part on other grounds,
Huntley v. Young, 462 S.E.2d 860 (S.C. 1995). Although Gray is not
a shareholder of RGI, he attempts to extend the fiduciary duty recog-
nized in Jacobson by noting that Riso-USA, as the sole shareholder
of RGI, controlled RGI and that the Repurchase Option gave him an
option to become a shareholder by repurchasing all the shares in the
corporation. Gray points out that his ability to exercise the Repur-
chase Option was dependent in part on how Riso-USA managed RGI
because the amount necessary to repurchase the stock was based on
RGI's assets to liabilities ratio.
We agree with Gray that the Sale Agreement implicitly prohibits
Riso-USA from thwarting Gray's exercise of the Repurchase Option
by intentionally inflating the cost to Gray of exercising the Repur-
chase Option. But we are not convinced this prohibition exists
because the Sale Agreement created a fiduciary relationship. Cf.
Taylor v. First Union Corp., 857 F.2d 240, 246 (4th Cir. 1988) (citing
Jacobson and noting that "[t]he fiduciary obligation established by
South Carolina law is quite specific" and that"the extent of the fidu-
ciary obligation is . . . settled"), cert. denied, 489 U.S. 1080 (1989).
Gray's argument confuses the implied covenant of good faith and fair
dealing with fiduciary duty. See Columbia East Assocs. v. Bi-Lo, Inc.,
386 S.E.2d 259, 262 (S.C. Ct. App. 1989) ("[T]he law will imply an
14
agreement to do those things that according to reason and justice
should be done to carry out the purpose for which the contract was
made."); Black's Law Dictionary 432 (abridged 6th ed. 1991) (defin-
ing "fiduciary duty" as "the highest standard of duty implied by law").
But regardless of whether Riso-USA had a fiduciary duty or simply
a duty to act fairly and in good faith, there is simply no evidence
beyond Gray's bald assertions that Riso-USA managed RGI in such
a way as to inflate the cost of exercising the Repurchase Option.
Therefore, summary judgment was appropriate on Gray's cause of
action for breach of fiduciary duty. See Celotex Corp., 477 U.S. at
324.
F.
Gray asserts that Riso-USA wrongfully refused to allow him to
repurchase the stock in RGI and that Riso-USA's resulting wrongful
detention of the stock constitutes conversion.
The tort of conversion is the illegal use, misuse, or detention of
another's chattel to the exclusion of the owner's rights. Hite, 409
S.E.2d at 342. To establish conversion, including conversion of stock,
the plaintiff must establish title or right to possession of the chattel.
Crane v. Citicorp Nat'l Servs., Inc., 437 S.E.2d 50, 52 (S.C. 1993);
see Daniel v. Post, 187 S.E. 915, 917-18 (S.C. 1936). An action for
conversion of stock has been allowed in cases where either the stock
certificate or payment of the stock's value has been wrongfully
retained by another. Hite, 409 S.E.2d at 342.
Here, however, Riso-USA unquestionably had title and right to
possess the stock by virtue of the Sale Agreement. Riso-USA did not
wrongfully retain the stock, because the parties never reached an
agreement on the amount Gray had to pay to repurchase the stock and
Gray never tendered payment for the stock. Therefore, summary judg-
ment in favor of Riso-USA was appropriate on Gray's conversion
cause of action.
G.
Finally, Gray asserts a cause of action against Riso-USA for breach
of the South Carolina Unfair Trade Practices Act (SCUTPA).
15
SCUTPA allows "[a]ny person who suffers any ascertainable loss of
money or property . . . as a result of the use or employment . . . of
an unfair or deceptive method, act or practice" in the conduct of any
trade or commerce to sue for actual damages. S.C. Code Ann. § 39-
5-140(a). A trade practice is "unfair" when it is offensive to public
policy or when it is immoral, unethical, or oppressive. Adams v. G.J.
Creel & Sons, Inc., 465 S.E.2d 84, 86 (S.C. 1995). A trade practice
is "deceptive" when it has a tendency to deceive. Id. To be actionable
under SCUTPA, an unfair or deceptive practice must have an adverse
effect on the public interest. Florence Paper Co. v. Orphan, 379
S.E.2d 289, 291 (S.C. 1989). Such a practice has an effect on the pub-
lic interest if the practice has the potential for repetition. Noack
Enters. v. Country Corner Interiors, Inc., 351 S.E.2d 347, 350-51
(S.C. Ct. App. 1986).
Gray argues that every alleged instance of misconduct on the part
of Riso-USA constitutes an unfair or deceptive act under SCUTPA.
To the extent the alleged misconduct relates to harm to RGI, Gray
does not have standing to assert that misconduct in his SCUTPA
cause of action. See S.C. Code Ann. § 39-5-140(a) (allowing "[a]ny
person who suffers any ascertainable loss of money or property" to
bring a SCUTPA claim). And, to the extent the misconduct occurred
on or before October 18, 1990, Gray has released Riso-USA from lia-
bility for the misconduct.
The remaining allegations of misconduct relate to Riso-USA's pre-
venting Gray from exercising the Repurchase Option. Gray has failed
to demonstrate a potential for repetition of this alleged misconduct.
The only evidence in the record regarding the potential for Riso-USA
to acquire the stock of other dealers and to prevent the dealers from
repurchasing the stock indicates that Riso-USA has never acquired
stock in another Riso dealership, has no plans to acquire all or part
of the stock of another dealership, and has no plans to give any
employee or other person an option to buy any ownership interest in
Riso-USA or any Riso-USA subsidiary. Thus, there is no potential for
repetition of Riso-USA's alleged misconduct of preventing Gray from
exercising the Repurchase Option. Summary judgment in favor of
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Riso-USA was therefore appropriate on Gray's cause of action for
breach of SCUTPA.5
IV.
For the reasons stated herein, we affirm the district court's dis-
missal of Gray's causes of action against Riso Kagaku and the district
court's entry of summary judgment in favor of Riso-USA.
AFFIRMED
_________________________________________________________________
5 Gray also asserts causes of action for fraud and constructive fraud
against Riso-USA, alleging that Riso-USA misrepresented certain facts
and failed to disclose other facts. Our review of the record and Gray's
arguments discloses that these causes of action are without merit. There-
fore, summary judgment in favor of Riso-USA was appropriate on
Gray's causes of action for fraud and constructive fraud.
17