Eddie Weathers v. Dieniahmar Music, LLC

SECOND DIVISION
DOYLE, C. J.,
BARNES, P. J., and BOGGS, J.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
July 7, 2016
In the Court of Appeals of Georgia
A16A0663. WEATHERS et al. v. DIENIAHMAR MUSIC, LLC et DO-030
al.
DOYLE, Chief Judge.
In a dispute involving a music publishing business, Eddie Weathers and his
company, All-Weather, LLC (collectively “Weathers”), sued Dieniahmar Music, LLC
(“DML”), EMI April Music, Inc., EMI Blackwood Music, Inc.,1 Willie Carter, and
Jermaine D. Mauldin a/k/a Jermaine Dupri (“Mauldin”), alleging claims for breach
of contract, fraud, conversion, breach of fiduciary duty, tortious interference with a
contract, and slander of title. Weathers appeals from the dismissal of his claims,
contending that the trial court erred because (1) Weathers has demonstrated a basis
1
The EMI defendants are referred to collectively as “EMI.”
for personal jurisdiction over EMI under Georgia’s Long Arm Statute;2 (2) Weathers
pleaded sufficient facts to allege breach of contract claims against Carter, Mauldin,
and DML; (3) Weathers pleaded sufficient facts to allege fraud claims against Carter,
Mauldin, and DML; and (4) the trial court applied the wrong standard to decide the
defendants’ motions to dismiss for failure to state a claim.3 For the reasons that
follow, we affirm in part, reverse in part, and remand the case.
“On appeal, we review a trial court’s decision to grant or deny a motion to
dismiss de novo. In reviewing the grant of a motion to dismiss, an appellate court
must construe the pleadings in the light most favorable to the appellant with all
doubts resolved in the appellant’s favor.”4
As alleged in the complaint, in June 2005, Weathers and Mauldin co-founded
a music publishing company, DML, and were the only two members of the company,
2
OCGA § 9-10-90 et seq.
3
Weathers does not challenge the dismissal of his claims for conversion,
breach of fiduciary duty, tortious interference with a contract, or slander of title as to
Carter, Mauldin, and DML. Therefore, those claims are deemed abandoned. See
Young v. Turner Heritage Homes, 241 Ga. App. 400, 401 (2) (526 SE2d 82) (1999)
(matters not enumerated as error are deemed abandoned).
4
(Citation and punctuation omitted.) Surette v. Henry County Bd. of Tax
Assessors, 332 Ga. App. 457, 458 (773 SE2d 416) (2015).
2
each having 50 percent equity. In March 2006, DML, Mauldin, and EMI executed an
amendment to a pre-existing co-publishing agreement resulting in EMI paying DML
royalties and for other music publication rights for music developed by DML (“Co-
Publishing Agreement”). As part of this process, Mauldin allegedly represented that
he was the sole owner of DML, but the complaint also alleges that EMI was aware
of Weathers’s equity in DML, and Mauldin and Weathers were each paid $75,000 as
an advance on the deal.
Weathers managed the day-to-day operations of DML, and Mauldin recruited
recording artists and song writers. EMI paid DML royalty payments to publish music
from the DML catalogue. All of the monies paid by EMI to DML allegedly were paid
to Mauldin, and in 2008, Weathers received a payment of $275,752.97 representing
two years of back payments of his share under the Co-Publishing Agreement.
Between 2008 and 2011, Weathers received 50 percent of all royalty payments.
Weathers alleges that in 2011 he became aware that he still was not receiving
his full share of monthly payments made by EMI to DML. Without consulting
Weathers, Mauldin had sought and received multiple advances, in $100,000
increments, from EMI to DML. In April 2013, when Weathers asked Mauldin about
certain missing payments, Mauldin informed him that he was considering selling the
3
DML catalogue to EMI for $500,000. Mauldin allegedly promised to pay Weathers
50 percent of the net proceeds of the sale, but this included a reduction for a recent
$100,000 advance payment, resulting in $400,000 net proceeds.
In July 2013, Mauldin sold DML to EMI “without the permission, consent, or
authorization of Weathers.” Weathers was dissatisfied with the sale price, but could
not get in touch with Mauldin. When he finally did, Mauldin confirmed the sale and,
along with Carter (Mauldin’s business manager), told Weathers that the sale proceeds
had been placed in a trust and that Weathers would receive $250,000 within 30 days.
That month, Mauldin transferred $10,000 to Weathers. The next month, Mauldin
received another $10,000, but Weathers alleges he never received full payment on
proceeds from the sale and past due royalties.5
Weathers and All-Weather, LLC, sued DML, EMI, Mauldin, and Carter. The
defendants answered, and each moved to dismiss for failure to state a claim, with EMI
also asserting lack of personal jurisdiction. Following a hearing, the trial court
granted EMI’s motion on the ground of lack of personal jurisdiction and the
5
Weathers claims that the $20,000 payments reduced what he was already
owed for royalty payments.
4
remaining defendants’ motions to dismiss for failure to state a claim. Weathers now
appeals.
1. Weathers challenges the trial court’s ruling that it lacked personal
jurisdiction over EMI. Based on the record before us, we conclude that the trial court
erred by ruling that Weathers “failed to present sufficient admissible evidence to
establish that EMI, a nonresident, has engaged in conduct or business invoking the
long-arm statute.”
As an initial matter,
[w]hen a defendant moves to dismiss for lack of personal jurisdiction,
he has the burden of proving that he is not subject to the jurisdiction of
the court. Where the motion is decided without an evidentiary hearing
and based solely upon the written submissions of the parties . . . , any
disputes of fact must be resolved in the light most favorable to the party
asserting the existence of personal jurisdiction, and we review the
decision of the trial court de novo.6
The trial court noted in its order, without citation to legal authority, that it
considered “all matters of record . . . [and] heard the oral argument of all those parties
present at the hearing . . . ,” but it is not clear from the record what evidence, if any,
6
(Citation omitted.) Paxton v. Citizens Bank & Trust of West Ga., 307 Ga. App.
112, 113 (704 SE2d 215) (2010).
5
EMI submitted. Further, as noted above, Weathers did submit an affidavit supporting
his argument in favor of the court’s jurisdiction over EMI. To the extent that the trial
court dismissed EMI because Weathers failed to “present sufficient admissible
evidence” demonstrating personal jurisdiction, it erred because it was EMI’s burden
to demonstrate the court’s lack of jurisdiction.
Turning to the merits of the jurisdiction question,
Georgia’s Long Arm Statute[, OCGA § 9-10-91 (1),] permits the
exercise of personal jurisdiction over a nonresident defendant if he,
personally or through an agent, “transacts any business within this
State.” In Innovative Clinical &c. Svcs. v. First Nat. Bank &c.,7 our
Supreme Court explained that “OCGA § 9-10-91(1) grants Georgia
courts the unlimited authority to exercise personal jurisdiction over any
nonresident who transacts any business in this State to the maximum
extent permitted by procedural due process, and it overruled all prior
decisions that interpreted “transacts any business within this State” more
narrowly.8
In doing so, the Supreme Court gave a literal interpretation to the phrase “transacts
any business,” and noted that prior cases had failed “to accord the appropriate breadth
7
279 Ga. 672, 675 (620 SE2d 352) (2005).
8
(Citation and punctuation omitted.) Paxton, 307 Ga. App. at 115.
6
to the construction of” that phrase.9 Therefore, Georgia’s long-arm jurisdiction under
OCGA § 9-10-91 (1) is broadly construed and bound only by notions of procedural
due process.
In determining the limits of procedural due process, this Court
applies a three-part test: Jurisdiction exists on the basis of transacting
business in this State if (1) the nonresident defendant has purposefully
done some act or consummated some transaction in this State, (2) if the
cause of action arises from or is connected with such act or transaction,
and (3) if the exercise of jurisdiction by the courts of this State does not
offend traditional notions of fairness and substantial justice. We analyze
the first two prongs of this test to determine whether a defendant has
established the minimum contacts with the forum state necessary for the
exercise of jurisdiction. And if such minimum contacts are found, we
then analyze the third prong of the test to consider whether the exercise
of jurisdiction is “reasonable” – that is, to ensure that it does not result
solely from random, fortuitous[,] or attenuated contacts. Importantly, the
application of the minimum-contacts rule will vary with the quality and
nature of the defendant’s activity. Nevertheless, it is essential in each
case that there be some act by which the defendant purposefully avails
itself of the privilege of conducting activities within the forum State,
thus invoking the benefits and protections of its laws.10
9
Innovative Clinical &c. Svcs., 279 Ga. at 675-676.
10
(Footnotes and punctuation omitted.) American College Connection, Inc. v.
Berkowitz, 332 Ga. App. 867, 870 (775 SE2d 226) (2015).
7
(a) Purposeful act or transaction in Georgia. Here, EMI argues that it never
physically conducted business or signed any contract in Georgia, relying on its
assertion that it only conducted limited business with DML using the telephone, mail,
and Internet. But
nothing in subsection (1) of OCGA § 9-10-91 requires the physical
presence of the nonresident in Georgia or minimizes the import of a
nonresident’s intangible contacts with the State. To the contrary,
Georgia allows the assertion of long-arm jurisdiction over nonresident
defendants based on business conducted through postal, telephonic, and
Internet contacts. And a single event may be a sufficient basis if its
effects within the forum are substantial enough.11
The record before us shows that EMI’s relevant contact with Georgia stems in
part from the Co-Publishing Agreement with DML. That agreement created an
ongoing relationship whereby DML, a Georgia business co-owned and operated by
Georgia residents, would develop and broker musical talent (also Georgia residents)
for profitable publication by EMI elsewhere. This relationship resulted in multiple,
ongoing payments to DML for a variety of continued uses of artistic work identified
and developed by DML over a period of ten years. Further, EMI’s subsequent
11
(Punctuaiton, footnotes, and emphasis omitted). Id. at 870-871.
8
purchase of Georgia-based DML establishes additional contact with Georgia. Also,
there is evidence that, as part of its music publishing business, EMI leased a
recording studio located in Atlanta, and its employees operated out of the studio to
conduct EMI’s business. These facts demonstrate purposeful acts and business
transacted in Georgia on the part of EMI.12
(b) Cause of action is connected with EMI’s Georgia activity. It is undisputed
that the present litigation arose because of EMI’s co-publishing agreement and
purchase of DML. Weathers’s status as a co-owner of DML demonstrates a clear
connection between EMI’s contacts with Georgia and Weathers’s claims.
(c) Exercise of jurisdiction in Georgia is reasonable. Finally, EMI’s
arrangement with DML and its resulting activities in Georgia provided fair warning
that it may be subject to the jurisdiction of a Georgia court.13 EMI purchased music
publication rights from a Georgia company, made routine royalty payments to the
12
See American College Connection, Inc., 332 Ga. App. at 872 (finding
personal jurisdiction was proper because the foreign defendant hired “a Georgia
resident . . . to assist the company in obtaining additional clients from Georgia”).
13
See Crossing Park Properties, LLC v. JDI Fort Lauderdale, LLC, 316 Ga.
App. 471, 477 (729 SE2d 605) (2012) (“negotiating with a Georgia broker and
sending documents to a Georgia resident for execution in Georgia provided fair
warning that it might be subject to suit in Georgia”).
9
Georgia company, leased a studio in Georgia to develop Georgia artists, and
ultimately purchased the Georgia company it dealt with.14 “Georgia has an interest,
as does every state, in providing its own citizens with a convenient forum for
redressing injuries wrought by nonresidents who have sought the state’s citizens out
for the purpose of business gain.”15 Accordingly, we conclude that the trial court
erred by dismissing EMI for lack of personal jurisdiction. The judgment dismissing
EMI on jurisdictional grounds is reversed, and the case is remanded for consideration
of EMI’s motion to dismiss on the merits of Weathers’s claims against EMI.16
2. Weathers also contends that the trial court erred by dismissing the breach of
contract claims against Carter, DML, and Mauldin. We agree in part.
A motion to dismiss for failure to state a claim upon which relief
may be granted should not be sustained unless (1) the allegations of the
complaint disclose with certainty that the claimant would not be entitled
to relief under any state of provable facts asserted in support thereof;
and (2) the movant establishes that the claimant could not possibly
introduce evidence within the framework of the complaint sufficient to
14
See American College Connection, Inc., 332 Ga. App. at 872.
15
(Punctuation omitted.) Crossing Park Properties, 316 Ga. App. at 477.
16
See, e.g., McRae v. Hogan, 317 Ga. App. 813, 821 (3) (b) (732 SE2d 853)
(2012) (remanding for consideration of issues not ruled upon by the trial court).
10
warrant a grant of the relief sought. In deciding a motion to dismiss, all
pleadings are to be construed most favorably to the party who filed
them, and all doubts regarding such pleadings must be resolved in the
filing party’s favor.17
To state a claim for breach of contract, Weathers’s complaint must generally
allege a factual famework showing
parties able to contract, a consideration moving to the contract, the
assent of the parties to the terms of the contract, and a subject matter
upon which the contract can operate. Each of these four essential terms
must be certain. In order that it may allege an agreement, a petition must
set forth a contract of such certainty and completeness that either party
may have a right of action upon it.18
(a) Breach of contract as to Carter. As alleged in the complaint, Carter’s role
over the course of the relevant transactions was to act as Mauldin’s business manager.
The complaint does not allege any contractual agreement between Carter and
Weathers, nor does it allege that Carter, acting for himself, wrongfully withheld
17
(Citation and punctuation omitted.) Best Jewelry Mfg. Co. v. Reed Elsevier
Inc., 334 Ga. App. 826, 826-827 (780 SE2d 689) (2015).
18
(Citation and punctuation omitted.) Laverson v. Macon Bibb County Hosp.
Auth., 226 Ga. App. 761, 762 (487 SE2d 621) (1997), quoting OCGA § 13-3-1.
11
money owed Weathers pursuant to a contract with Carter. Accordingly, there is no set
of provable facts within the framework alleged by the complaint that would result in
Carter’s liability to Weathers for breach of contract, and the trial court correctly
dismissed this claim against Carter.
(b) Breach of contract as to Mauldin and DML. The essence of Weathers’s
complaint is that (1) Mauldin was paid revenue from EMI, which revenue he did not
properly share with Weathers, (2) Mauldin wrongfully sold DML, and (3) Mauldin
did not fully share the proceeds of the sale with Weathers. These claims arise from
the alleged co-ownership of DML by Weathers and Mauldin and the operating
agreement governing their relationship in DML. We note that the record does not
contain these agreements, so our review is confined to the allegations in the
complaint.19 Nevertheless, viewed in the proper light on a motion to dismiss, the facts
alleged in the complaint, if later proven, could demonstrate liability on the part of
19
We note that Weathers’s appellate brief states that a number of exhibits,
including the DML operating agreement and the Co-Publishing Agreement, were
attached to his complaint but are not present in the appellate record. Certain responses
in the defendants’ answers imply that they were served with the exhibits along with
the complaint. Nevertheless, Weathers states that the trial court clerk has no record
of those exhibits, and he has not made any attempt to supplement the appellate record.
Our review is, as always, based on the record before us, and we resolve the issues
presented in this appeal by reference to the allegations in the complaint, despite the
absence of any attached exhibits.
12
Mauldin, for example, for failing to share with Weathers the revenue paid to DML
by EMI as agreed in the operating agreement, or for failing to share the proceeds of
the sale of DML according to the equity allocation in the operating agreement.20 As
noted above,
[a] motion to dismiss should only be granted if the allegations of the
complaint, construed most favorably to the plaintiff, disclose with
certainty that the plaintiff would not be entitled to relief under any state
of provable facts. Stated somewhat differently, a motion to dismiss
should not be granted unless the movant establishes that the claimant
could not possibly introduce evidence within the framework of the
complaint sufficient to warrant a grant of the relief sought.21
Similarly, with respect to DML itself, the facts alleged could, if proven, support
a breach of contract claim, for example, based on the fact that the company, under the
control of Mauldin, failed to properly compensate Weathers for his role in the
company. We are not in a position at this point to parse out the relative liability
between Mauldin and DML, but the record at this stage alleges potential claims for
20
See, e.g., Webb v. Bank of America, N.A., 328 Ga. App. 62, 63 (761 SE2d
485) (2014) (facts alleged in plaintiff’s complaint could support claim for breach of
contract).
21
(Footnote and punctuation omitted.) Ewing v. City of Atlanta, 281 Ga. 652,
653 (2) (642 SE2d 100) (2007).
13
breach of contract as to both. Accordingly, the trial court erred by dismissing the
breach of contract claims against Mauldin and DML.22
3. Weathers next contends that the trial court erred by dismissing his fraud
claims against Mauldin, DML, and Carter. We agree.
As noted above, “[t]he tort of fraud requires a willful misrepresentation of a
material fact, made to induce another to act, upon which such person acts [or avoids
acting] to his injury.”23
Although fraud must be pled with particularity under OCGA § 9-11-9
(b), a complaint alleging fraud should not be dismissed for failure to
state a claim unless it appears beyond a doubt that the pleader can prove
no set of facts in support of his claim which would entitle him to relief.
Rather than move to dismiss, a defendant seeking greater particularity
may either move for a more definite statement or wait for the outcome
of discovery.24
22
See generally Webb, 328 Ga. App. at 64 (“[F]actual evidence which may or
may not be developed during discovery . . . can be considered on a subsequent motion
for summary judgment.”)
23
(Punctuation omitted.) Avery v. Chrysler Motors Corp., 214 Ga. App. 602,
603 (1) (448 SE2d 737) (1994).
24
(Citations and punctuation omitted.) Hedquist v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 284 Ga. App. 387, 394 (2) (b) (643 SE2d 864) (2007).
14
Here, Weathers’s complaint alleged that Mauldin, Carter, and DML (through
Mauldin) knowingly made misrepresentations about placing the proceeds of the sale
of DML into an allegedly nonexistent trust and that Weathers would be paid $250,000
from that trust within 30 days. Weathers alleged that he relied on these
misrepresentations, and as a result of not being paid, he lost revenue and other
business opportunities. Viewing these allegations in the light most favorable to
Weathers, as is proper, we conclude that Weathers might be able to prove a set of
facts that would support his fraud claims. Accordingly, the trial court erred by
dismissing the fraud claims as to Carter, Mauldin, and DML at this stage of the
proceedings.25
4. Finally, Weathers contends that the trial court erred by applying the wrong
standard to the defendants’ motions to dismiss, thereby incorrectly placing a burden
upon Weathers to proffer evidence to overcome their motions. It is well-settled that
a motion to dismiss under OCGA § 9-11-12 (b) (6) for failure to state a claim
should be granted only when: the allegations of the complaint disclose
with certainty that the claimant would not be entitled to relief under any
state of provable facts asserted in support thereof; and the movant
establishes that the claimant could not possibly introduce evidence
25
See id.
15
within the framework of the complaint sufficient to warrant a grant of
the relief sought.26
Here, the trial court’s dismissal orders state that the trial court “considered all
matters of record in this action . . . and has determined that good cause exists for the
relief” requested by the defendants. In the order addressing Weathers’s failure to state
his claims, the trial court concluded that Weathers “failed to present sufficient
admissible evidence to establish”27 the claims asserted in the complaint. But no
discovery had been conducted, and the defendants did not submit evidence in support
of their motions to dismiss. Instead,
in ruling on the motion to dismiss, the trial court was required to view
the allegations and documents in the pleadings in [Weathers’s] favor
[regardless of the absence of evidence] and then limit its determination
to whether there was any possibility that [he] would be able to produce
sufficient evidence at trial to prove that [he] was entitled to relief.28
26
(Punctuation omitted.) Common Cause/Ga. v. City of Atlanta, 279 Ga. 480,
481 (614 SE2d 761) (2005).
27
(Emphasis supplied.)
28
Islam v. Wells Fargo Bank, N.A., 327 Ga. App. 197, 201 (1) (757 SE2d 663)
(2014). See also Speedway Motorsports, Inc. v. Pinnacle Bank, 315 Ga. App. 320,
323 (1) (727 SE2d 151) (2012) (“[A] plaintiff has no obligation to anticipate and
plead away any defenses in his complaint.”).
16
Although a trial court has the option to consider evidence attached to a
motion to dismiss and brief in support thereof, when [the court] does so
it converts the motion to dismiss into a motion for summary judgment,
governed by OCGA § 9-11-56. In accordance with this procedure, the
trial court has the burden of informing a plaintiff that it will be
considering exhibits attached to the defendant’s motion to dismiss and
that the plaintiff would have no less than 30 days within which to submit
his own evidence in response to the motion for summary judgment.29
The trial court did not employ this procedure here, and no evidence was submitted in
support of the motions to dismiss.30 In light of our rulings in Divisions 2, any
29
(Citation and punctuation omitted.) Babalola v. HSBC Bank, USA, 324 Ga.
App. 750, 751 n.4 (751 SE2d 545) (2013).
30
With respect to the motion to dismiss on personal jurisdiction grounds,
Weathers did submit an affidavit addressing personal jurisdiction in Georgia over
both EMI defendants. Consideration of matters outside the pleadings on a 12 (b) (2)
motion to dismiss for lack of personal jurisdiction does not convert the motion to one
for summary judgment. See, e.g., Church v. Bell, 213 Ga. App. 44, 45 (443 SE2d 677)
(1994) (“Under OCGA § 9-11-12 (b), . . . only motions under OCGA § 9-11-12 (b)
(6), failure to state a claim upon which relief can be granted, are converted to motions
for summary judgment when matters outside the pleadings are considered.”)
(punctuation omitted); Behar v. Aero Med Intl., Inc., 185 Ga. App. 845 (1) (366 SE2d
223) (1988) (“A motion to dismiss for lack of personal jurisdiction is a motion in
abatement and not a motion in bar. Thus, motions to dismiss for lack of personal
jurisdiction cannot be disposed of as motions for summary judgment.” (citations
omitted)). Therefore, this affidavit did not alter the procedural posture of the motion
to dismiss.
17
resulting error was not harmful as to every issue. For purposes of remand as to EMI,
we emphasize the proper standard.
Judgment affirmed in part and reversed in part; case remanded with direction.
Barnes, P. J. and Boggs, J., concur.
18