Window World of Baton Rouge, LLC v. Window World, Inc.

2019 NCBC 10

WINDOW WORLD OF BATON ROUGE, LLC; WINDOW WORLD OF DALLAS, LLC; WINDOW WORLD OF TRI STATE AREA, LLC; and JAMES W. ROLAND, Plaintiffs, v. WINDOW WORLD, INC.; WINDOW WORLD INTERNATIONAL, LLC; and TAMMY WHITWORTH, Defendants.

WINDOW WORLD OF ST. LOUIS, INC.; WINDOW WORLD OF KANSAS CITY, INC.; WINDOW WORLD OF SPRINGFIELD/PEORIA, INC.; JAMES T. LOMAX III; JONATHAN GILLETTE; B&E INVESTORS, INC.; WINDOW WORLD OF NORTH ATLANTA, INC.; WINDOW WORLD OF CENTRAL ALABAMA, INC.; MICHAEL EDWARDS; MELISSA EDWARDS; WINDOW WORLD OF CENTRAL PA, LLC; ANGELL P. WESNERFORD; KENNETH R. FORD, JR.; WORLD OF WINDOWS OF DENVER, LLC; RICK D. ROSE; CHRISTINA M. ROSE; WINDOW WORLD OF ROCKFORD, INC.; WINDOW WORLD OF JOLIET, INC.; SCOTT A. WILLIAMSON; JENNIFER L. WILLIAMSON; BRIAN C. HOPKINS; WINDOW WORLD OF LEXINGTON, INC.; TOMMY R. JONES; JEREMY T. SHUMATE;WINDOW WORLD OF PHOENIX LLC; JAMES BALLARD; and TONI BALLARD, Plaintiffs, v. WINDOW WORLD, INC.; WINDOW WORLD INTERNATIONAL, LLC; and TAMMY WHITWORTH, individually and as trustee of the Tammy E. Whitworth Revocable Trust, Defendants.

Nos. 15 CVS 1, 15 CVS 2

Superior Court of North Carolina, Wilkes

February 11, 2019

Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, by Charles E. Coble, Robert J. King III, Benjamin R. Norman Jeffrey E. Oleynik, and Andrew L. Rodenbough, and Keogh Cox & Wilson, Ltd., by Richard W. Wolff, John P. Wolff, III and Virginia J. McLin, for Plaintiffs Window World of Baton Rouge, LLC, Window World of Dallas, LLC, Window World of Tri State Area LLC, James W. Roland, Window World of St. Louis Inc., Window World of Kansas City, Inc., Window World of Springfield/Peoria, Inc., James T. Lomax III, Jonathan Gillette, B&E Investors, Inc., Window World of North Atlanta, Inc., Window World of Central Alabama, Inc., Michael Edwards, Melissa Edwards, Window World of Central PA, LLC, Angell P. Wesnerford, Kenneth R. Ford, Jr., World of Windows of Denver, LLC, Rick D. Rose, Christina M. Rose, Window World of Rockford, Inc., Window World of Joliet, Inc., Scott A. Williamson, Jennifer L. Williamson, Brian C. Hopkins, Window World of Lexington, Inc., Tommy R. Jones, Jeremy T. Shumate, Window World of Phoenix LLC, James Ballard, and Toni Ballard.

Manning, Fulton & Skinner, P.A., by Michael T. Medford, Judson A. Welborn, Natalie M. Rice, and Jessica B. Vickers, and Laffey, Leitner & Goode LLC, by Mark M. Leitner, Joseph S. Goode, Jessica L. Farley, Sarah E. Thomas Pagels, and John W. Halpin, for Defendants Window World, Inc. and Window World International, LLC.

Bell, Davis & Pitt, P.A., by Andrew A. Freeman and Alan M. Ruley, for Defendant Tammy Whitworth.

ORDER AND OPINION ON DEFENDANT WINDOW WORLD INTERNATIONAL, LLC'S MOTION FOR JUDGMENT ON THE PLEADINGS

Louis A. Bledsoe, III Chief Business Court Judge.

1. THIS MATTER is before the Court on Defendant Window World International, LLC's ("WWI") Motion for Judgment on the Pleadings (the "Motion") in the above-captioned cases.^[1] After reviewing the Motion, the briefs in support of and in opposition to the Motion, the relevant materials associated with the Motion, and the arguments of counsel at the hearing on the Motion, the Court hereby GRANTS in part and DENIES in part the Motion.

I. FACTUAL AND PROCEDURAL BACKGROUND

2. The Court does not make findings of fact on motions for judgment on the pleadings under North Carolina Rule of Civil Procedure 12(c) and recites only those allegations in the pleadings that are relevant and necessary to the Court's determination of the Motion. See, e.g., Erickson v. Starling, 235 N.C. 643, 657, 71 S.E.2d 384, 394 (1952).^[2]

3. Defendant Window World, Inc. ("Window World") is a North Carolina corporation with its principal place of business in Wilkes County, North Carolina. (Pls.' Third Am. Compl. ¶ 15, [hereinafter "Baton Rouge TAC"], ECF No. 252 (15 CVS 1); Pls.' Third Am. Compl. ¶ 50, [hereinafter "St. Louis TAC"], ECF No. 275 (15 CVS 2).) Window World is in the business of franchising its business to franchisees, who purchase materials such as windows, doors, and siding from third-party suppliers at wholesale and install the products under the Window World name. (Baton Rouge TAC ¶ 20; St. Louis TAC ¶ 55.) Window World also licenses the use of Window World trademarks and other Window World intellectual property to its franchisees. (Baton Rouge TAC ¶ 20; St. Louis TAC ¶ 55.)

4. WWI is a Delaware limited liability company with its principal place of business in Wilkes County, North Carolina. (Baton Rouge TAC ¶ 16; St. Louis TAC ¶ 51.) WWI was organized on June 22, 2010, (Baton Rouge TAC ¶ 289; St. Louis TAC ¶ 394), and is owned solely by Defendant Tammy Whitworth ("Ms. Whitworth"), (Baton Rouge TAC ¶ 199; St. Louis TAC ¶ 298).

5. Plaintiffs in these actions are various Window World franchisees and franchisee owners. (See Baton Rouge TAC ¶¶ 11-14; St. Louis TAC ¶¶ 12-49.) St. Louis Action Plaintiffs James T. Lomax III ("Lomax") and Jonathan Gillette ("Gillette") own Plaintiffs Window World of St. Louis, Inc., Window World of Kansas City, Inc., and Window World of Springfield/Peoria, Inc. (collectively with Lomax and Gillette, the "Lomax Plaintiffs"). (St. Louis TAC ¶ 17.) Baton Rouge Plaintiff James W. Roland ("Roland") owns Plaintiffs Window World of Baton Rouge, LLC, Window World of Dallas, LLC, and Window World of Tri State Area, LLC (collectively with Roland, the "Roland Plaintiffs" and, together with the Lomax Plaintiffs, the "Lomax and Roland Plaintiffs"). (Baton Rouge TAC ¶¶ 11-14.)

6. On March 22, 2010, Ms. Whitworth became the sole shareholder of Window World after the death of her husband, Todd, and appointed herself Window World's CEO at a time when Window World had no board of directors. (Baton Rouge TAC ¶ 176; St. Louis TAC ¶ 275.) On June 21, 2010, Ms. Whitworth transferred all of her Window World stock to the Tammy E. Whitworth Revocable Trust, an entity solely under her control. (Baton Rouge TAC ¶ 178; St. Louis TAC ¶ 277.)

7. According to Plaintiffs, Ms. Whitworth created WWI on June 22, 2010 to receive Window World's intellectual property in a scheme to defraud Window World's creditors, including Plaintiffs. (Baton Rouge TAC ¶ 289; St. Louis TAC ¶ 394.) In particular, Plaintiffs allege that the "sole purpose for which [Ms. Whitworth] created WWI was as a repository for [Window World's] intellectual property assets . . . in the event of . . . an 'unfriendly suit.'" (Baton Rouge TAC ¶ 200; St. Louis TAC ¶ 299.)^[3]

8. On June 23, 2010, the day after WWI was organized, Window World transferred to WWI all of its intellectual property assets (the "2010 Transfer"), including but not limited to the Window World trademarks (the "Transferred Assets"). (Baton Rouge TAC ¶ 289; St. Louis TAC ¶ 394.) WWI paid nothing to Window World in exchange for the Transferred Assets. (Baton Rouge TAC ¶ 201; St. Louis TAC ¶ 300.) Window World later paid WWI a total of $120, 000 for a license to continue using the Transferred Assets. (Baton Rouge TAC ¶ 201; St. Louis TAC ¶ 300.)

9. Sometime in 2010, WWI registered its ownership in some or all of the Transferred Assets with the United States Patent and Trademark Office (the "USPTO").^[4]

10. Sometime prior to April 2011, Plaintiffs allege that Window World's intent to defraud creditors "was confirmed in statements made to [Roland] and to [Lomax] . . . by upper management of [Window World] about the purpose of the [2010 Transfer]." (Baton Rouge TAC ¶ 292; see St. Louis TAC ¶ 397.) The Third Amended Complaints contain no allegations suggesting that any of the other Plaintiffs (the "Remaining Plaintiffs")^[5]-apart from the Lomax and Roland Plaintiffs-were made aware of the 2010 Transfer before the Actions were filed.

11. On April 23, 2013, the Lomax and Roland Plaintiffs entered into a tolling agreement with Window World (the "Tolling Agreement"). (Baton Rouge TAC ¶ 157; St. Louis TAC ¶ 256; see WWI's Br. Supp. Mot. J. Pleadings Ex. A [hereinafter "Tolling Agmt."], ECF No. 365.1 (15 CVS 1), ECF No. 385.1 (15 CVS 2).)^[6] The Tolling Agreement provided that "all time-based defenses, including without limitation any applicable statutes of limitations, statutes of repose, and the doctrine of laches with respect to the Covered Claims^[7] are hereby tolled effective April 23, 2013." (Tolling Agmt. ¶ 2.) WWI was not a party to the Tolling Agreement, (see Tolling Agmt.), and the Remaining Plaintiffs did not enter into a similar agreement with Window World.

12. Plaintiffs commenced these Actions on January 2, 2015, and filed their Third Amended Complaint in each on January 11, 2017. (See Baton Rouge TAC ¶¶ 222-300; St. Louis TAC ¶¶ 321-405.) Although Plaintiffs assert numerous claims in each Action, the only claim lodged against WWI is for fraudulent transfer under the North Carolina Uniform Voidable Transactions Act (the "NCUVTA"). (See Baton Rouge TAC ¶¶ 286-300; St. Louis TAC ¶¶ 391-405).^[8] Plaintiffs' NCUVTA claims seek to void the 2010 Transfer. (Baton Rouge TAC ¶ 300; St. Louis TAC ¶ 405.)

13. On March 29, 2018, WWI filed the Motion, contending that Plaintiffs' fraudulent transfer claims must be dismissed as a matter of law because they were not filed within the time period prescribed by the applicable statute of repose. (WWI's Mot. J. Pleadings, ECF No. 364 (15 CVS 1), ECF No. 384 (15 CVS 2).)

14. The Court held a hearing on the Motion on May 24, 2018, at which all parties were represented by counsel. The Motion has been fully briefed and heard and is now ripe for determination.

II. LEGAL STANDARD

15. Under Rule 12(c) of the North Carolina Rules of Civil Procedure, "[a]fter the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." N.C. R. Civ. P. 12(c). A motion under Rule 12(c) "is the...