ERVIN, Judge.
Defendant C. Rudy Alexander appeals from an order denying his motions to dismiss, for judgment on the pleadings, and to stay the proceedings stemming from the claims advanced by Plaintiffs Scott Ellison, James Ellison and Paul Ellison and to require that those claims be submitted for arbitration on the grounds that Defendant is entitled to enforce arbitration agreements between Plaintiffs and The Elevator Channel, Inc." (The Elevator Channel).
On 22 September 2008, Plaintiffs filed a complaint against Defendant seeking compensatory and punitive damages for fraud, constructive fraud, breach of fiduciary duty, and unfair and deceptive trade practices.
On 18 December 2008, Defendant filed a motion seeking the dismissal of Plaintiffs' complaint. On 26 February 2009, Defendant filed an answer to Plaintiffs' complaint in which he denied the material allegations of Plaintiffs' complaint, sought dismissal of Plaintiffs' claims, and asserted that, if the proceedings that Plaintiffs had initiated were not dismissed, they should be "stayed, pending arbitration of Plaintiffs' claims" pursuant to an arbitration clause contained in Section VII of the Subscription and Shareholder Agreements (SSAs) signed by Plaintiffs on each occasion when they purchased shares in The Elevator Channel. On 26 February 2009, Defendant filed a separate motion "to stay in favor of binding arbitration or, in the alternative, for judgment on the pleadings." On 12 March 2009, Plaintiffs signed a memorandum in opposition to Defendant's dismissal motion and a memorandum in opposition to Defendant's request for a stay.
On 17 March 2009, the trial court conducted a hearing on Defendant's motions. On 2 July 2009, the trial court entered an order denying Defendant's motions for dismissal and judgment on the pleadings and denying Defendant's motion for a stay and to compel arbitration on the grounds that "a valid agreement to arbitrate the disputes at issue did not exist among the parties." Defendant noted an appeal to this Court from the trial court's order.
"A judgment is either interlocutory or the final determination of the rights of the parties." N.C. Gen.Stat. § 1A-1, Rule 54(a) (2009). "An interlocutory order is one made during the pendency of an action, which does not dispose of the case, but leaves it for further action by the trial court in order to settle and determine the entire controversy." Veazey v. Durham, 231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950). The order from which Defendant has appealed is interlocutory in nature.
"As a general rule, interlocutory orders are not immediately appealable." Turner v. Hammocks Beach Corp., 363 N.C. 555, 558, 681 S.E.2d 770, 773 (2009) (citing Davis v. Davis, 360 N.C. 518, 524, 631 S.E.2d 114, 119 (2006)). However, immediate appeal of interlocutory orders and judgments is available when the interlocutory order or judgment affects a substantial right under N.C. Gen.Stat. §§ 1-277(a) and 7A-27(d)(1). Sharpe v. Worland, 351 N.C. 159, 161-62, 522 S.E.2d 577, 579 (1999), disc. review denied, 352 N.C. 150, 544 S.E.2d 228 (2000). "[A]n order denying arbitration is immediately appealable because it involves a substantial right, the right to arbitrate claims, which might be lost if appeal is delayed." Martin v. Vance, 133 N.C. App. 116, 119, 514 S.E.2d 306, 308 (1999). Thus, Defendant's challenge to the denial of his motion to stay the proceedings and compel arbitration is properly before us.
The ultimate issue raised by Defendant's appeal is whether the trial court erred by denying Defendant's motion to compel arbitration.
Raspet v. Buck, 147 N.C. App. 133, 136, 554 S.E.2d 676, 678 (2001) (quoting PaineWebber Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir.1990)). "The law of contracts governs the issue of whether an agreement to arbitrate exists." Brown v. Centex Homes, 171 N.C. App. 741, 744, 615 S.E.2d 86, 88 (2005) (citing Routh v. Snap-On Tools Corp., 108 N.C. App. 268, 271, 423 S.E.2d 791, 794 (1992)). In addressing a request to compel arbitration, we recognize that:
Rodgers Builders, Inc. v. McQueen, 76 N.C. App. 16, 23-24, 331 S.E.2d 726, 731 (1985) (citing Coach Lines v. Brotherhood, 254 N.C. 60, 67-68, 118 S.E.2d 37, 43 (1961), and quoting Cyclone Roofing Co. v. LaFave Co., 312 N.C. 224, 229, 321 S.E.2d 872, 876 (1984), disc. review denied, 315 N.C. 590, 341 S.E.2d 29 (1986)). Thus, the "interpretation of the terms of an arbitration agreement [is] governed by contract principles" as well. Trafalgar House Constr., Inc. v. MSL Enters., Inc., 128 N.C. App. 252, 256, 494 S.E.2d 613, 616 (1998). "Although we are not bound by federal case law, we may find their analysis and holdings persuasive." Brown, 171 N.C.App. at 744, 615 S.E.2d at 88 (citing Huggard v. Wake County Hosp. Sys., 102 N.C. App. 772, 775, 403 S.E.2d 568, 570 (1991), aff'd per curiam, 330 N.C. 610, 411 S.E.2d 610 (1992)). "The trial court's findings regarding the existence of an arbitration agreement are conclusive on appeal where supported by competent evidence, even where the evidence might have supported findings to the contrary." Sciolino v. TD Waterhouse Investor Servs., 149 N.C. App. 642, 645, 562 S.E.2d 64, 66 (2002) (citing Routh, 108 N.C.App. at 272, 423 S.E.2d at 794), disc. review denied, 356 N.C. 167, 568 S.E.2d 611 (2002). However, "[t]he trial court's conclusion as to whether a particular dispute is subject to arbitration is a conclusion of law, reviewable de novo by the appellate court." Raspet, 147 N.C.App. at 136, 554 S.E.2d at 678.
On appeal, Defendant argues that the trial court "erred by failing to compel arbitration of the disputes and stay the litigation." We agree.
A careful review of the record demonstrates that a number of pertinent facts, including the following, are not in dispute between the parties:
As a preliminary matter, we note that the only specific transaction at issue in the complaint is Plaintiffs' purchase of stock in The Elevator Channel. Plaintiffs' complaint does not allege, for example, that Plaintiffs lost money on their investment in The Elevator Channel; that any of the Plaintiffs worked for The Elevator Channel; that any of the Plaintiffs bought or sold products or services from The Elevator Channel; or that any of the Plaintiffs engaged in other business transactions with The Elevator Channel. Therefore, Plaintiffs' allegation to the effect that Defendant misled them into investing in The Elevator Channel is the only factual basis for their claims for fraud, breach of fiduciary duty, and constructive fraud.
"[T]he following essential elements of actual fraud are well established: `(1) False representation or concealment of a material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive, (4) which does in fact deceive, (5) resulting in damage to the injured party.'" Forbis v. Neal, 361 N.C. 519, 526-27, 649 S.E.2d 382, 387 (2007) (quoting Ragsdale v. Kennedy, 286 N.C. 130, 138, 209 S.E.2d 494, 500 (1974)). According to Plaintiffs, Defendant "made misrepresentations of material facts to induce Plaintiffs' investments." Plaintiffs further contend that "Defendant's superior position on the Board of Directors and as CEO of The Elevator Channel, Inc." prevented Plaintiffs from learning of Defendant's misrepresentations. As a result, the fundamental accusation underlying Plaintiffs' claim that Defendant engaged in actual fraud is their assertion that Defendant made active
In addition, Plaintiffs sought damages from Defendant for breach of fiduciary duty.
Dalton v. Camp, 353 N.C. 647, 651, 548 S.E.2d 704, 707-08 (2001) (citing Curl v. Key, 311 N.C. 259, 264, 316 S.E.2d 272, 275 (1984), and quoting Abbitt v. Gregory, 201 N.C. 577, 598, 160 S.E. 896, 906 (1931)). "`[I]n North Carolina ... there are two types of fiduciary relationships: (1) those that arise from legal relations such as attorney and client, broker and client ... partners, principal and agent, trustee and cestui que trust, and (2) those that exist as a fact, in which there is confidence reposed on one side, and the resulting superiority and influence on the other.'" S.N.R. Mgmt. Corp. v. Danube Partners 141, LLC, 189 N.C. App. 601, 613, 659 S.E.2d 442, 451 (2008) (quoting Rhone-Poulenc Agro S.A. v. Monsanto Co., 73 F.Supp.2d 540, 546 (M.D.N.C.1999)). The primary fiduciary duty upon which Plaintiffs rely in asserting this claim against Defendant stems from his role as "shareholder, director and/or officer" of The Elevator Channel. The violation of such a duty would clearly involve a breach of a relationship of trust and confidence sufficient to support a breach of fiduciary duty claim.
"To assert a claim of constructive fraud, plaintiff must allege: `(1) a relationship of trust and confidence, (2) that the defendant took advantage of that position of trust in order to benefit himself, and (3) that plaintiff was, as a result, injured,'" so that "`[t]he primary difference between pleading a claim for constructive fraud and one for breach of fiduciary duty is [the requirement] that the defendant benefit himself.'" Clay v. Monroe, 189 N.C. App. 482, 488, 658 S.E.2d 532, 536 (2008) (quoting White v. Consolidated Planning, Inc., 166 N.C. App. 283, 294, 603 S.E.2d 147, 156 (2004), disc. review denied, 359 N.C. 286, 610 S.E.2d 717 (2005)). As a result of the fact that the part of Plaintiffs' complaint that attempts to assert a claim for constructive fraud incorporates the earlier paragraphs of their complaint, we will assume that Plaintiffs have correctly stated a claim sounding in constructive fraud stemming from Defendant's breach of his fiduciary duties as CEO and director.
Thus, Plaintiffs' fraud, breach of fiduciary duty, and constructive fraud claims are all based on allegations that Defendant, who was an officer and director of The Elevator Channel, misrepresented his education, financial background, and other qualifications in order to induce them to invest in The Elevator Channel, a corporation which he served as officer and director. Plaintiffs' assertion that Defendant acted in his "personal" or individual capacity rests solely on the claim that Defendant allegedly misrepresented his "personal" background in the process of inducing them to invest in The Elevator Channel. Plaintiffs have cited no authority for the proposition that the factual content of alleged misrepresentations or the fact that a party has been sued individually rather than for the purpose of supporting an attempt to establish vicarious liability determines the capacity in which certain representations were made, and we know of none. On the contrary, at the time that Defendant made the representations upon which Plaintiffs' claims for fraud, breach of fiduciary duty, and constructive fraud rest, the allegations of the complaint indicate that he was acting in his capacity as a director and officer of The Elevator Channel given that he was inducing Plaintiffs to invest in that entity. Thus, we conclude that the allegations of Plaintiffs'
As we have already established, "[w]hether a dispute is subject to arbitration involves a two pronged analysis; the court must ascertain both (1) whether the parties had a valid agreement to arbitrate, and also (2) whether `the specific dispute falls within the substantive scope of that agreement.'" Sloan Fin. Grp., Inc. v. Beckett, 159 N.C. App. 470, 478, 583 S.E.2d 325, 330 (2003) (quoting PaineWebber Inc., 921 F.2d at 511, aff'd, 358 N.C. 146, 593 S.E.2d 583 (2004)). Thus, a proper resolution of this case requires an application of this two-pronged test in light of the relevant materials in the record.
Immediately above the portion of each SSA spelling out its substantive terms is a two-paragraph disclaimer set out in capital letters warning signatories to the SSA that, before investing, "investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved." The disclaimer also warns that the securities are not recommended or guaranteed by any government agency and are subject to transfer and resale restrictions. According to each SSA, The Elevator Channel has made a private offering of company shares "to a limited number of selected persons" who "hereby subscribe[] to purchase certain shares of stock." After a list of representations by The Elevator Channel, the SSAs describe the representations that each subscriber is required to make, including representations that:
The SSAs also address issues such as the rights of minority shareholders, share transfer and sale limitations, and other questions relating to the purchase and distribution of shares that are not relevant to this appeal. Section VII of each SSA then provides that:
In addition, Section XI of each SSA contains an integration clause providing that:
In light of these contractual provisions, we must resolve two fundamental questions: (1) does Plaintiffs' complaint assert "disputes and claims arising in connection with" the SSAs?; and, (2) if so, may Defendant enforce the arbitration clause in light of the facts present here?
As discussed above, Plaintiffs' complaint alleges that their investment in The Elevator Channel was induced by Defendant's misrepresentations. The "gravamen of [their] Complaint is that they would not have invested in The Elevator Channel in the absence of Defendant's false representations about himself personally." Thus, Plaintiffs' claims stem from the circumstances surrounding their purchase of stock in The Elevator Channel, including whether Defendant misled them into making that investment. As we have previously demonstrated, the SSA spells out the terms and conditions under which Plaintiffs purchased shares in The Elevator Channel. Thus, Plaintiffs' claims are clearly "connected" with the SSAs, since the execution of those agreements was the vehicle by which Plaintiffs effectuated their decision to invest in The Elevator Channel.
Secondly, we conclude that Defendant may properly invoke the arbitration clause of the SSAs despite the fact that he was not, individually, a signatory to that document. Plaintiffs argue that, despite the fact that Defendant signed the SSAs on behalf of The Elevator Channel, they have asserted claims against him individually and that this fact precludes him from enforcing the arbitration clause. However, "[t]he obligation and entitlement to arbitrate `does not attach only to one who has personally signed the written arbitration provision.' Rather, `[w]ell-established common law principles dictate that in an appropriate case a nonsignatory can enforce, or be bound by, an arbitration provision within a contract executed by other parties.'" Washington Square Securities, Inc. v. Aune, 385 F.3d 432, 435 (4th Cir.2004) (quoting Int'l. Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 416-17 (4th Cir.2000)).
In Brown, plaintiffs sued a real estate agent, and the firm by which she was employed, based on statements made by the agent prior to plaintiffs' purchase of property. Brown, 171 N.C.App. at 742-43, 615 S.E.2d at 87, According to this Court, despite the fact that the agent had not signed the sales contract, she was entitled to enforce an arbitration clause contained in that agreement:
Id. at 745, 615 S.E.2d at 88 (quoting Collie v. Wehr Dissolution Corp., 345 F.Supp.2d 555, 562 (M.D.N.C.2004)). Similarly, in Collie, the Court concluded:
Collie, 345 F.Supp.2d at 562 (quoting Davidson v. Becker, 256 F.Supp.2d 377, 384 (S.D.Md.2003)). Thus, the mere fact that Defendant did not sign the SSAs in his individual capacity does not preclude him from
In this case, Plaintiffs allege that Defendant, as CEO, director, and shareholder of The Elevator Channel, misrepresented material facts about his qualifications to run the company in order to induce Plaintiffs' investment. The actions upon which Plaintiffs' claims are predicated were taken in his capacity as a representative of The Elevator Channel for the purpose of inducing Plaintiffs to invest in that corporation. Aside from the fact that Plaintiffs purchased their stock subject to the SSAs, certain of the defenses upon which Defendant relies rest on the provisions of the SSAs as well. Thus, we conclude, based on the allegations set out in the complaint, that Defendant was acting as an agent of The Elevator Channel at the time that the conduct upon which Plaintiffs' claims are predicated occurred, so that Plaintiffs' claims are inextricably entwined with the provisions of the SSAs, entitling Defendant to enforce the arbitration provision of that agreement.
Although Plaintiffs have advanced a number of different arguments in an attempt to persuade us to reach a contrary result, we do not find any of them persuasive. First, Plaintiffs characterize each SSA as a limited document that "primarily concerns the restriction of stock ownership" and contend that, because they "do not have a dispute with The Elevator Channel regarding stock transfer restrictions," their "grievances do not have a substantial relationship to the [SSAs]." However, as we have previously discussed, each SSA is a contract for the purchase of shares in The Elevator Channel that contains warnings and disclaimers concerning the risks of investment and numerous other purchase-related provisions. Contrary to Plaintiffs' contention that the SSA "does not address ... personal representations made by Defendant," that document requires each signatory to explicitly represent that, in purchasing shares in The Elevator Channel, he or she did not rely upon any representations or promises from a source other than the official corporate documents, a requirement that is underscored by the SSAs' integration provision. As a result, we conclude that, contrary to Plaintiffs' argument, the SSAs bear a substantial relationship to the claims that Plaintiffs have asserted against Defendant in this proceeding.
Secondly, Plaintiffs argue that the "personal nature of these disputes" bars Defendant from enforcing the SSAs' arbitration clause. In essence, Plaintiffs contend that their claims rest upon "tortious acts Defendant committed in his personal capacity." The fundamental difficulty with this argument is that, while Plaintiffs allege that Defendant misrepresented facts about his personal background, they claim that he did so in his capacity as CEO and director in order to induce Plaintiffs to invest in The Elevator Channel.
Burlington Indus., Inc. v. Foil, 284 N.C. 740, 758, 202 S.E.2d 591, 603 (1974) (citations omitted). "A corporation can act only through its agents, which include its corporate officers." Woodson v. Rowland, 329 N.C. 330, 344, 407 S.E.2d 222, 231 (1991) (citing Raper v. McCrory-McLellan Corp., 259 N.C. 199, 130 S.E.2d 281 (1963)). Defendant's "position as chief executive officer of the corporation was such that his acts and knowledge would be the acts and knowledge of the corporation which can act only through its agents." Sledge Lumber Corp. v. Southern Builders Equip. Co., 257 N.C. 435, 439, 126 S.E.2d 97, 100 (1962). As a result, we conclude that Plaintiffs' complaint alleges actions taken by Defendant in his capacity as
Finally, Plaintiffs attempt to distinguish this case from cases such as Brown and Collie on the basis that, in those cases, the plaintiff sued the principal as well as the agent. The reasons which have led this Court, and others, to allow agents to assert the benefits of arbitration clauses contained in their principal's contract with the plaintiff exist regardless of whether the principal, in addition to the agent, is a named party to litigation. Plaintiffs do not explain the reason that the presence of the principal, in addition to the agent, should make any difference in our analysis, and we are unable to ascertain any reason for reaching that conclusion on our own. Recognizing such a difference would undercut North Carolina's policy in favor of arbitration by allowing a plaintiff to determine whether a particular claim would be subject to arbitration by merely suing the agents of the signatory to the arbitration agreement instead of suing the signatory party. Thus, we conclude that the distinction upon which Plaintiffs rely is not a material one and that none of Plaintiffs' arguments justify a decision to uphold the trial court's order.
Thus, for the reasons set forth above, we conclude that Plaintiffs' claims arise in connection with the SSA and that Defendant was acting in his capacity as a representative of The Elevator Channel when he allegedly made the misrepresentations upon which Plaintiffs' claims rest. Therefore, Defendant is entitled to enforce the arbitration clause in the SSAs, so that the trial court's order denying Defendant's motion to compel arbitration should be, and hereby is, reversed and this matter is remanded to the trial court for the entry of an order staying all further proceedings and requiring the parties to proceed to arbitration in accordance with the relevant provision of the SSAs.
REVERSED AND REMANDED.
Judges McGEE and GEER concur.
