Charlotte Motor Speedway, LLC v. Cnty. of Cabarrus

748 S.E.2d 171

CHARLOTTE MOTOR SPEEDWAY, LLC and Speedway Motorsports, Inc., Plaintiffs,

v.COUNTY OF CABARRUS, Defendant.

No. COA12–1361.

Court of Appeals of North Carolina.

Oct. 1, 2013.

Appeal by Plaintiffs from order entered 21 March 2012 by Judge Robert C. Ervin in Cabarrus County Superior Court. Heard in the Court of Appeals 9 April 2013.

James, McElroy & Diehl, P.A., Charlotte, by Preston O. Odom, III, William K. Diehl, Jr., and John R. Buric, for plaintiffs-appellants.

Erwin, Bishop, Capitano & Moss, P.A., Charlotte, by J. Daniel Bishop and Matthew M. Holtgrewe; and Law Offices of Richard M. Koch, by Richard M. Koch, Cabarrus County Attorney, for defendant-appellee.

DAVIS, Judge.

Charlotte Motor Speedway, LLC (“CMS”) and Speedway Motorsports, Inc. (“SMI”) (collectively “Plaintiffs”) appeal from the trial court's order dismissing their amended complaint against Cabarrus County (the “County”). Plaintiffs primarily contend that they asserted a valid claim for breach of contract against the County in connection with an agreement between the parties concerning the continued presence of the Charlotte Motor Speedway (“the Speedway”) in Cabarrus County and the construction of an adjacent racing facility. After careful review, we affirm the trial court's order.

Factual Background

In August 2007, O. Bruton Smith (“Smith”), the Chief Executive Officer of CMS and SMI, announced SMI's intention to construct a National Hot Rod Association-approved racing facility known as the “Dragway” on land adjacent to the Speedway within the County. In October 2007, the Concord City Council amended Concord's Unified Development Ordinance in a manner that would have prevented the Dragway from being built. Smith subsequently announced that SMI planned to relocate the Speedway—and construct the Dragway—outside of Cabarrus County.

In response, the City Council repealed its zoning amendment so as to allow for the construction of the Dragway. On 20 November 2007, the County and Concord approached SMI and made a proposal to provide $60 million in funds to improve the infrastructure surrounding the Speedway and future Dragway. SMI rejected this proposal.¹

On 21 November 2007, Robert Carruth (“Carruth”), the Chairman of the Cabarrus County Board of Commissioners, and Scott Padgett (“Padgett”), the Mayor of Concord, sent a letter dated 21 November 2007 (“the 21 November Letter”) to Smith which stated, in pertinent part, as follows:

Cabarrus County and the City of Concord are committed to providing $80,000,000 through local efforts for the financing, design and construction of road, pedestrian, utility and noise attenuation projects. The City and Cabarrus County concur that SMI's project list defines investments important to meeting your vision of creating the finest motorsports racing complex that includes a new drag strip facility and major improvements to Lowe's Motor Speedway.

The commitment is to generate $80,000,000 for funding related infrastructure and transportation investments. However, we need an additional 36 months to secure $20,000,000 of this $80,000,000 from the State of North Carolina. If the $20,000,000 is not secured from the State in 36 months, our pledge is to provide it from other sources. Any contributions secured from the State or others, or projects that are constructed directly by the State, will be applied to the $80,000,000 commitment and will not be in addition to this amount.

...

It is intended that the financing of some of these projects making up the $80,000,000 be structured through a combination of tax based incentives and other incentive grants so SMI has the ability to impact the timing, cost and management of the construction projects. The balance will be funded by other City and County controlled revenues.

...

We understand that all parties anticipate that the $80,000,000 will be formalized in an agreement that will also provide an outline of a schedule to prioritize projects and to identify the investment that SMI plans to make through the construction of the drag strip and improvements to Lowe's Motor Speedway.

...

[T]he Cabarrus County Board of Commissioners and the Concord City Council are committed to partnering with you to make the public improvements necessary to address the long term transportation needs faced by the speedway and the community around it.

That same day, Smith called Padgett and told him that “we have an agreement.” Carruth was also contacted by Smith's staff and informed that SMI had accepted the 21 November 2007 proposal.

Plaintiffs proceeded to construct the Dragway, which opened on 20 August 2008. A document entitled “Proposed Formal Agreement” was ultimately submitted by the County and Concord to Plaintiffs the following day. The proposed agreement contained terms requiring SMI to expend “tens of millions of dollars within only three years ... but ... allow[ing] the [County and Concord] up to forty years to reimburse SMI.” SMI summarily rejected the proposed agreement on the grounds that it contained terms that were “never agreed upon or discussed and are wholly unreasonable.”

Based on their dissatisfaction with the proposed agreement, Plaintiffs filed a lawsuit in Cabarrus County Superior Court against the County and Concord containing causes of action for (1) specific performance; (2) breach of contract; and (3) fraud or, in the alternative, negligent misrepresentation. On 28 May 2010, Plaintiffs voluntarily dismissed their original complaint, and on 29 June 2011, Plaintiffs filed an amended complaint asserting the same causes of action but naming Cabarrus County as the sole defendant.²Plaintiffs attached the 21 November Letter to the amended complaint and incorporated its terms by reference.

On 29 August 2011, the County filed an answer and motion to dismiss in which it sought dismissal of Plaintiffs' amended complaint pursuant to Rules 12(b)(1), (2), and (6) of the North Carolina Rules of Civil Procedure.

Following a hearing on the County's motion to dismiss, the trial court entered an order on 21 March 2012 granting the County's motion and dismissing all of Plaintiffs' claims with prejudice. Plaintiffs gave timely notice of appeal.

Judicial Notice

The County has filed a motion requesting that this Court take judicial notice of the following: (1) “comprehensive financial data” and records of the County and Concord; (2) property tax rates and tax revenues for the County and Concord in 2008; and (3) the absence of records showing the taking of action by the Cabarrus County Board of Commissioners or the Concord City Council at a public meeting to approve the 21 November Letter or to delegate authority to Carruth or Padgett to make a binding agreement with Plaintiffs.

In its motion, the County contends that taking judicial notice of the items described above “will harmonize the facts the Court may properly consider in reviewing the trial court's dismissal order under Rule 12(b)(6)....” However, it is well established that “[t]he only purpose of a Rule 12(b)(6) motion is to test the legal sufficiency of the pleading against which it is directed.” Weaver v. Saint Joseph of the Pines, Inc., 187 N.C.App. 198, 203, 652 S.E.2d 701, 707 (2007) (citation and quotation marks omitted). ³ “As a general proposition, therefore, matters outside the complaint are not germane to a Rule 12(b)(6) motion.” Id. Accordingly, we deny Defendant's request to take judicial notice of these facts.

Analysis

I. Contract Claims

We begin by addressing Plaintiffs' claims for breach of contract and specific performance. Plaintiffs contend that the trial court erred in dismissing these claims because the amended complaint alleged a valid contract between them and the County and that the contract was breached by the County.

When reviewing an order of dismissal for failure to state a claim upon which relief may be granted pursuant to Rule 12(b)(6), we assess the legal sufficiency of the complaint while taking all of the material factual allegations included therein as true. Burgin v. Owen, 181 N.C.App. 511, 512, 640 S.E.2d 427, 429,appeal dismissed and disc. review denied,361 N.C. 425, 647 S.E.2d 98,cert. denied,361 N.C. 690, 652 S.E.2d 257 (2007). “Legal conclusions, however, are not entitled to a presumption of validity.” Guyton v. FM Lending Servs., Inc., 199 N.C.App. 30, 33, 681 S.E.2d 465, 469 (2009). An allegation that a valid contract exists between parties is a legal conclusion. See Guarascio v. New Hanover Health Network, Inc., 163 N.C.App. 160, 165, 592 S.E.2d 612, 614 (holding that employee's assertion that valid employment contract existed between him and defendant was legal conclusion “not entitled to a presumption of truth”) (citation and quotation marks omitted), disc. review denied,358 N.C. 375, 597 S.E.2d 130 (2004).

Plaintiffs' claims for breach of contract and specific performance necessarily hinge on the threshold issue of whether a valid contract actually existed between them and the County. See Poor v. Hill, 138 N.C.App. 19, 26, 530 S.E.2d 838, 843 (2000) (“The elements of a claim for breach of contract are (1) existence of a valid contract and (2) breach of the terms of that contract.”); McKinnon v. CV Indus., Inc., 213 N.C.App. 328, 333, 713 S.E.2d 495, 500 (“For a court to award specific performance, there must be a breach of a valid contract.”), disc. review denied,365 N.C. 353, 718 S.E.2d 376 (2011).

Plaintiffs attached to their amended complaint the 21 November Letter—the document that they contend formed a contract between them and the County—and repeatedly discussed its terms in their pleading. Specifically, Plaintiffs alleged that the 21 November Letter “standing alone is a valid and enforceable contract” in which the parties agreed that “in exchange for the economic incentives set forth in the [21 November Letter], SMI agreed to keep the Speedway in Concord and move forward with the Dragway.” In ruling on the County's motion to dismiss, the trial court was...