Beaumont v. Branch

1

ERIC BEAUMONT, Plaintiff, v. WALTER SCOTTY BRANCH; SHEA C. HARRELSON; AVANTE DIAGNOSTICS LLC, a Delaware entity; MEDCOAST LLC, a South Carolina entity; and VIKOR SCIENTIFIC LLC, a South Carolina entity, Defendants.

No. 2:23-cv-03546-DCN

United States District Court, D. South Carolina, Charleston Division

October 26, 2023

ORDER

DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

The following matter is before the court on defendants Walter Scotty Branch (“Branch”), Shea C. Harrelson (“Harrelson”), Avante Diagnostics LLC (“Avante”), MedCoast LLC (“MedCoast”), and Vikor Scientific LLC's (“Vikor”) (collectively “defendants”) motion to dismiss for failure to state a claim. ECF No. 14. For the reasons set forth below the court grants in part and denies in part the motion.

I. BACKGROUND

This dispute arises from two interrelated agreements to invest funds into start-up laboratory ventures to allow those ventures to expand and roll out “revolutionary laboratory diagnostic testing.” ECF No. 1, Compl. ¶¶ 10-11. Branch and Harrelson approached plaintiff Eric Beaumont (“Beaumont”) to solicit funding for their laboratory ventures and promised him “that his investment would make him a partner and co-owner in their laboratory ventures, and, if they succeeded, he would receive lifelong returns that would provide for his family for the rest of their lives.” Id. ¶ 12. Beaumont entered into the first investment agreement with Branch and Harrelson on August 23, 2017, (the “August 2017 Agreement”) wherein Beaumont agreed to provide $100,000 in exchange for 1.5% of Branch and Harrelson's laboratory ventures' gross profits. Id. ¶ 15; see also ECF No. 1-1.^[1]At the time of the August 2017 Agreement, Branch and Harrelson had formed the company MedCoast which had an existing contract with North Central Florida Neurodiagnostic Services (“NCF”). Compl. ¶ 16. After the initial investment, Branch and Harrelson grew their laboratory ventures, and on September 13, 2017, they formed Avante. Id. ¶ 23. Within days of the first investment, Branch solicited Beaumont for an additional $150,000 in exchange for fifteen percent of Branch's own partnership interest in the laboratory ventures, which they formalized through payment and a written agreement fully executed on September 21, 2017 (the “September 2017 Agreement”). Id. ¶¶ 20-27; see also ECF No. 1-2. Together, Beaumont received two types of ownership or profit interests in exchange for his high-risk investments: (1) 1.5% of gross profits from Branch and Harrelson's laboratory ventures; and (2) fifteen percent of Branch's partnership interest in those ventures. Compl. ¶ 28.

Starting in the fall of 2017, Beaumont began receiving separate payments pursuant to the two agreements. Id. ¶ 29. He initially received payments directly from NCF under the August 2017 Agreement and received payments from Branch personally under the September 2017 Agreement. Id. However, payments from NCF ceased after about six months when Branch and Harrelson stopped conducting business with NCF. Id. ¶ 34. Thereafter, starting in March 2018, payments under the August 2017 Agreement came directly from Harrelson. Id. For approximately the first six-to-nine months, Beaumont was able to verify, in an online portal, that the payments he received under the August 2017 Agreement accurately reflected the true percentage of the ventures' gross profits. Id. ¶ 30.

Consistent with the laboratories' growth, Beaumont's payments under the August 2017 Agreement dramatically increased from an initial payment of $2,162.83 on October 18, 2017, to monthly payments of more than $20,000 in September and October 2018. Id. ¶ 31. However, around that same time, Branch and Harrelson terminated Beaumont's access to the online portal, id. ¶ 32, and on May 16, 2018, Branch and Harrelson formed Vikor, id. ¶ 35. After a payment on October 26, 2018, payments ceased for approximately six months during a restructuring and transition period. Id. ¶ 39. As of the restructuring, Beaumont had received $225,147.71 from his investments. Id.

On April 13, 2019, Beaumont provided his bank account information to Harrelson to facilitate anticipated payments coming from Vikor starting on April 15, 2019. Id. ¶ 41. On April 17, 2019, Beaumont began receiving payments solely from Vikor, as opposed to from Harrelson or Branch. Id. ¶ 42. On May 23, 2019, Branch emailed Beaumont to express that the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”), 18 U.S.C. § 220, meant that they could no longer pay per sample or tied to revenues, which restricted Branch and Harrelson's ability to comply with the August 2017 Agreement and the September 2017 Agreement. Id. ¶ 44. As such, Branch and Harrelson limited Beaumont's payment to a lump sum of $7,500 per month every month moving forward, rather than as a percentage of gross profits or ownership as was stipulated by the agreements. Id. Beaumont received these $7,500 per month for nearly three years. Id. ¶ 49. Beaumont avers that Branch and Harrelson misrepresented the impact of EKRA on the agreements, and in so doing, Harrelson, Branch, and Vikor willfully, wantonly, or at the very least, recklessly “purposefully [and] severely reduc[ed] Mr. Beaumont's payments.” Id. ¶ 45.

On June 1, 2020, Branch and Harrelson administratively dissolved Avante. Id. ¶ 50. With each transition-from MedCoast to Avante and from Avante to Vikor- neither Branch nor Harrelson gave any indication that the changes, or even the dissolution of Avante, somehow changed Beaumont's interests. Id. However, on February 15, 2023, Vikor's Chief Financial Officer Kelly Diamiano (“Diamiano”) emailed Beaumont to explained that the company was restructuring its ownership and that the email served as a ninety-day notice that his monthly payments of $7,500 would cease. Id. ¶ 51. As of the filing of the complaint, Beaumont had received a total of $609,666.71. Id. ¶ 52. On April 26, 2023, Beaumont served Vikor, Branch, and Harrelson with a Notice of Breach and Demand for Good-Faith Negotiations, which disputed both the allegedly EKRA-based 2019 unilateral payment modification and defendants' new unilateral modification terminating Beaumont's interests and ceasing payments altogether. Id. ¶ 54. Defendants responded through counsel, and the parties unsuccessfully attempted mediation. Id. ¶ 55.

On July 21, 2023, Beaumont filed this lawsuit against defendants pursuant to diversity jurisdiction, 28 U.S.C. § 1332.^[2] ECF No. 1, Compl. On September 1, 2023, defendants filed a motion to dismiss for failure to state a claim. ECF No. 14. Beaumont responded in opposition on September 15, 2023, ECF No. 15, to which defendants replied on September 22, 2023, ECF No. 17. The court held a hearing on this motion on October 17, 2023. ECF No. 19. As such, this motion has been fully briefed and is now ripe for review.

II. STANDARD

A. Fed.R.Civ.P. 12(b)(6)

A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss under Rule 12(b)(6) . . . does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”). To be legally sufficient, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A Rule 12(b)(6) motion should not be granted unless it appears certain that the plaintiff can prove no set of facts that would support his claim and would entitle him to relief. Mylan Lab'ys, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993).

When considering a Rule 12(b)(6) motion, the court should accept all well-pleaded allegations as true and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Lab'ys, 7 F.3d at 1134. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

III. DISCUSSION

Beaumont brings eleven causes of action. Compl. ¶¶ 61-149. Three of the claims are based on the August 2017 Agreement: (1) breach of contract, id. ¶¶ 61-73; (3) breach of the implied covenant, id. ¶¶ 86-91; and (6) breach of contract accompanied by fraudulent act, id. ¶¶ 106-10.^[3]Three of the claims are based on the September 2017 Agreement: (2) breach of contract, id. ¶¶ 74-85; (4) breach of the implied covenant, id. ¶¶ 92-97; and (7) breach of contract accompanied by fraudulent act, id. ¶¶ 111-119. The final five claims are based on both agreements and the general facts underlying Beaumont's claims: (5) fraud, id. ¶¶ 98-105; (8) failure to provide access to books and records in violation of S.C. Code Ann. § 33-44-408(a), id. ¶¶ 120-24; (9) member oppression under South Carolina law, id. ¶¶ 125-35; (10) violation of the South Carolina Unfair Trade Practices Act (“SCUTPA”), id. ¶¶ 136-40; and (11) successor liability, id. ¶¶ 141-49. Defendants seek to dismiss all eleven claims because the claims fail to state a plausible cause of action, are barred by the applicable statute of limitations, are barred by the applicable statute of frauds, and/or fail to state fraudulent acts with particularity for those claims alleging fraud. ECF No. 14 at 1-3.

The court starts...