MOUNTAINEER FIRE & RESCUE EQUIPMENT, LLC, BRIAN CAVENDER, and WALTER CAVENDER, Petitioners v. CITY NATIONAL BANK OF WEST VIRGINIA, and JOE BEAM, Respondents
No. 18-0984
Supreme Court of Appeals of West Virginia
November 20, 2020
September 2020 Term
Appeal from the Circuit Court of Kanawha County
The Honorable Charles E. King, Judge
Civil Action No. 18-C-17
REVERSED AND REMANDED
Submitted: September 15, 2020
Filed: November 20, 2020
Michael D. Weikle, Esq.1
Tiffin, Ohio
Counsel for Petitioners
Ancil G. Ramey, Esq.
Steptoe & Johnson PLLC
Huntington, West Virginia
Counsel for Respondent City National Bank of West Virginia
Miles B. Berger, Esq.
Charleston, West Virginia
Romano & Associates, PLLC
Counsel for Respondent Joe Beam
JUSTICE HUTCHISON delivered the Opinion of the Court.
CHIEF JUSTICE ARMSTEAD concurs, in part, and dissents, in part, and reserves the right to file a separate opinion.
JUSTICE JENKINS concurs, in part, and dissents, in part, and reserves the right to file a separate opinion.
SYLLABUS
- “Appellate review of a circuit court‘s order granting a motion to dismiss a complaint is de novo.” Syllabus Point 2, State ex rel. McGraw v. Scott Runyan Pontiac-Buick, Inc., 194 W. Va. 770, 461 S.E.2d 516 (1995).
- “The trial court, in appraising the sufficiency of a complaint on a
Rule 12(b)(6) motion, should not dismiss the complaint unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).” Syllabus Point 3, Chapman v. Kane Transfer Co., 160 W. Va. 530, 236 S.E.2d 207 (1977). - “An interpretation of the
West Virginia Rules of Civil Procedure presents a question of law subject to a de novo review.” Syllabus Point 4, Keesecker v. Bird, 200 W. Va. 667, 490 S.E.2d 754 (1997). - “Only matters contained in the pleading can be considered on a motion to dismiss under
Rule 12(b) R.C.P. , and if matters outside the pleading are presented to the court and are not excluded by it, the motion should be treated as one for summary judgment and disposed of underRule 56 R.C.P. if there is no genuine issue as to any material fact inconnection therewith.” Syllabus Point 4, in part, U. S. Fid. & Guar. Co. v. Eades, 150 W. Va. 238, 144 S.E.2d 703 (1965) (overruled on other grounds by Sprouse v. Clay Commc‘n, Inc., 158 W. Va. 427, 211 S.E.2d 674 (1975)).
- “A circuit court ruling on a motion to dismiss under
Rule 12(b)(6) of the West Virginia Rules of Civil Procedure may properly consider exhibits attached to the complaint without converting the motion to aRule 56 motion for summary judgment.” Syllabus Point 1, Forshey v. Jackson, 222 W. Va. 743, 671 S.E.2d 748 (2008). - When a movant makes a motion to dismiss a pleading pursuant to
Rule 12(b)(6) of the West Virginia Rules of Civil Procedure , and attaches to the motion a document that is outside of the pleading, a court may consider the document only if (1) the pleading implicitly or explicitly refers to the document; (2) the document is integral to the pleading‘s allegations; and (3) no party questions the authenticity of the document. If a document does not meet these requirements, the circuit court must either expressly disregard the document or treat the motion as one for summary judgment as required byRule 12(b)(7) . - A circuit court‘s decision whether or not to review a document outside of the pleadings, which is attached to a motion to dismiss pursuant to
Rule 12(b)(6) of the West Virginia Rules of Civil Procedure , will be reviewed for an abuse of discretion.
HUTCHISON, Justice:
In this appeal from the Circuit Court of Kanawha County, we examine orders dismissing various counterclaims and crossclaims from this action. The parties’ arguments about the dismissal orders seemingly implicate the complicated interplay between the duties of banks toward their customers, the Uniform Commercial Code, and the statutory fiduciary duties of the members of limited liability companies.
At its heart, however, this appeal focuses on a narrow issue: the interpretation and application of
As we set forth below, we find that the petitioners sufficiently asserted claims against both respondents, and that the respondents failed to show otherwise beyond doubt. We further find that a circuit court may consider only those exhibits that are intrinsic to the drafting of the pleading under challenge.
I. Factual and Procedural Background
When we examine a circuit court‘s order dismissing a pleading under
Petitioners Walter Cavender and Brian Cavender are experienced firefighters and EMTs. Working together for 15 years, the Cavenders sold fire safety and rescue equipment.
In 2011, the Cavenders met with respondent Joe Beam, who presented himself as a successful businessman with an excellent credit record and a long-established banking relationship with the other respondent, City National Bank of West Virginia, Inc. (“City National“). The Cavenders reached an agreement with Mr. Beam to create a new limited liability company, petitioner Mountaineer Fire & Safety Equipment, LLC (“Mountaineer Fire“). The three men agreed that the Cavenders would continue to sell equipment to their many existing customers, while Mr. Beam would provide the Cavenders with office space and an office manager to handle mail, accounting, and other paperwork.
The parties agreed that the Cavenders would be the majority owners and own 60% of Mountaineer Fire, while Mr. Beam would own 40%.
On March 11, 2011, Brian Cavender filed Articles of Organization for Mountaineer Fire with the West Virginia Secretary of State‘s office identifying Brian Cavender, Walter Cavender, and Mr. Beam as the only members.
Seven days later, on March 18, 2011, Brian Cavender and Mr. Beam visited City National to open a company checking account on behalf of Mountaineer Fire. City National provided them with a form resolution titled “Limited Liability Company Banking Resolution” (the “2011 Resolution“), and Brian Cavender and Mr. Beam completed and signed the form. The resolution designated Brian Cavender and Mr. Beam as the agents having authority to sign City National documents for Mountaineer Fire. The 2011 Resolution further authorized Brian Cavender and Mr. Beam to “enter into any such agreements” with City National regarding “funds, checks or items” of Mountaineer Fire. The 2011 Resolution also specified that it would remain in effect until City National received a “written notice of any amendment or revocation thereof[.]” Despite quoting language from the 2011 resolution, the petitioners did not attach a copy of the document to their pleading.
After receiving the signed 2011 Resolution, City National opened a checking account in the name of Mountaineer Fire (the “2011 account“).
Over two years later, around June 27, 2013, Mr. Beam visited City National. The petitioners allege that, without notice to or authorization by Brian or Walter Cavender, and without a properly adopted corporate resolution, Mr. Beam directed City National to open a new checking account in the name of Mountaineer Fire (the “2013 account“).
The petitioners assert in their pleading that City National provided Mr. Beam with a form “Limited Liability Company Authorization Resolution” to complete (the “2013 Resolution“). However, it seems Mr. Beam failed to properly complete the form 2013 Resolution. Quoting from the resolution, the petitioners point out that the form resolution required signatures from at least two members of Mountaineer Fire (the “Secretary” and “One Other Officer“); the form was signed by Mr. Beam alone. Second, quoting from the 2013 Resolution, the petitioners noted that the form provided: “This resolution supersedes resolution dated _______. If not completed, all resolutions remain in effect.” Because Mr. Beam did not complete this portion, the petitioners contend that the 2011 Resolution continued to govern Mountaineer Fire‘s relationship with City National and, more importantly, that Brian Cavender retained the authority to act on behalf of Mountaineer Fire with City National. While the petitioners quoted language from the 2013 resolution, they did not attach a copy of the document to their pleading.
Despite Mr. Beam not having true authority from Mountaineer Fire to open an account, and despite not providing a properly adopted corporate resolution establishing his agency, the petitioners allege that City National improperly opened the new 2013
account. City National designated Mr. Beam as the only person with authority to make deposits
In the Spring of 2017, Brian Cavender completed the sale of a fire truck on behalf of Mountaineer Fire. The sale terms reached by Brian Cavender required Mountaineer Fire to pay a $10,000 sales commission to a third party and permitted Mountaineer Fire to earn a $50,000 fee. Thereafter, Brian Cavender asked Mr. Beam several times if payment for the fire truck had been received; Mr. Beam repeatedly said it had not. On May 31, 2017, Brian Cavender went to Mountaineer Fire‘s office after hours to search the files kept by Mr. Beam and his office manager. The files revealed that Mountaineer Fire had in fact received full payment from the customer for the fire truck. Further, the files showed that Mr. Beam had paid himself $55,000 and had simultaneously failed to pay the third-party his commission (thereby breaching Mountaineer Fire‘s agreement with the third party, and adversely affecting the company‘s relationship with the third party).
The petitioners assert that Brian Cavender‘s search of the files also revealed that Mr. Beam had “made undisclosed and unapproved distributions” to himself and to other businesses he owned for services supposedly provided to Mountaineer Fire. West Virginia law provides that “[a] member [of a limited liability company] is not entitled to remuneration for services performed for a limited liability company[.]”
Cavender paying himself or his other business interests from Mountaineer Fire‘s income, and never received proper authorization to do so.
Following discussions with Brian Cavender, Mr. Beam agreed that he would withdraw as a member from Mountaineer Fire. However, Mr. Beam allegedly refused to provide a complete accounting of Mountaineer Fire‘s income and expenses. Moreover, Mr. Beam asserted that he was entitled to thousands of dollars in compensation from Mountaineer Fire for services he had provided. Further, the petitioners believed that at some point Mr. Beam initiated a collection action against a customer of Mountaineer Fire, a volunteer fire department. The collection action was not successful, and the customer is demanding Mountaineer Fire pay its legal expenses. The customer now refuses to work with the petitioners, and other customers in the area will not accept the petitioners’ sales calls.
On June 8, 2017, Brian Cavender filed a report with the West Virginia Secretary of State‘s office listing Brian Cavender and Walter Cavender as the only members of Mountaineer Fire. Thereafter, the Cavenders opened a new checking account with a different bank on behalf of Mountaineer Fire.
The petitioners claim that Brian Cavender then approached City National and asked it to close Mountaineer Fire‘s accounts.2 Brian Cavender presented City National
with the documents filed with the Secretary of State showing Mr. Cavender was a member of the company, and, conversely, showing that Mr. Beam was not. The petitioners allege that City National refused to close the 2013 account and “falsely or recklessly” informed Brian Cavender that he did not have authority over Mountaineer Fire‘s account. Nevertheless, City National subsequently agreed to change the mailing address on the 2013 account from Mr. Beam‘s offices to the Cavenders’ offices.
In early December 2017, Mountaineer Fire received in the mail a printed account statement for the 2013 account from City National that showed a balance of $5,130. The statement allegedly also showed that, after May 31, 2017, and after Mr. Beam agreed to leave the company, Mr. Beam had collected outstanding balances owed to Mountaineer Fire by certain customers, had deposited those amounts into the 2013 account with City National, and had then paid himself.
Thereafter, the petitioners say they again contacted City National and again demanded that City National close the 2013 account. The petitioners note that the 2011 Resolution remained in effect and that Brian Cavender
The petitioners later learned that, on December 20, 2017, Mr. Beam filed a report with the Secretary of State that added his name as a member of Mountaineer Fire. Mr. Beam falsely certified that he was a member of Mountaineer Fire “holding a power-of-attorney and . . . duly authorized to file this report on behalf of this limited liability company[.]”
This case was initiated in the circuit court by respondent City National on January 5, 2018. City National filed a “complaint for interpleader” against petitioners Mountaineer Fire, Brian Cavender and Walter Cavender, and against respondent Mr. Beam. City National asserted that it had learned of a dispute between the Cavenders and Mr. Beam over Mountaineer Fire‘s funds in City National accounts and, because of the dispute, could not “determine which of the various parties to this action may have some valid claim to the disputed funds[.]” City National asked the circuit court for an order permitting it to pay the disputed funds into the circuit court so that any party who was lawfully entitled could resolve their claim to those funds. See generally
This appeal arises out of the thirty-page responsive pleading filed by petitioners Mountaineer Fire, Brian Cavender, and Walter Cavender. The petitioners answered City National‘s complaint for interpleader, asserting at various points that City National had been “grossly negligent” and was “not an innocent stakeholder and bears substantial responsibility for the unlawful conversion of Mountaineer Fire‘s funds by Joe Beam.” The petitioners claimed that City National opened the 2013 account despite
knowing that Mr. Beam did not have proper authorization from Mountaineer Fire to do so, and that City National knew or should have known Mr. Beam was violating his fiduciary duties to the company.
The petitioners’ pleading went on to assert (1) crossclaims against Mr. Beam and (2) counterclaims against City National.
Against Mr. Beam, the petitioners asserted five crossclaims. First, the petitioners generally contended that, as a member of Mountaineer Fire, Mr. Beam breached his fiduciary duties of loyalty and care to the company and his fellow members. However, in an error that later became a point of contention, the petitioners went on to specifically allege that Mr. Beam violated the duties of loyalty and care “set forth under West Virginia Code 31B-4-409(a)(1) and (2)(a)(b) and (c)[.]” As Mr. Beam would later argue,
Against City National, the petitioners asserted three counterclaims. In the first counterclaim, the petitioners alleged that City National had engaged in breach of contract and breach of the covenant of good faith and fair dealing. In the second counterclaim, the petitioners claimed that City National had aided and abetted the breach of a fiduciary duty by Mr. Beam. The petitioners restated their claim that Mr. Beam had breached his fiduciary duties to Mountaineer Fire, and then alleged that City National either knew Mr. Beam was breaching those duties or was negligent in not knowing. According to the petitioners, City National‘s actions “constitute substantial and knowing assistance” to Mr. Beam in breaching his fiduciary obligations and, therefore, City National should be jointly liable for the damages caused by that breach. In the third and final counterclaim, the petitioners alleged that City National had aided and abetted Mr. Beam in committing tortious interference with Mountaineer Fire‘s business operations.
In two orders, both dated September 26, 2018, the circuit court dismissed all of the petitioners’ cross- and counterclaims. In the first order regarding the five crossclaims against Mr. Beam, the circuit court focused on the fiduciary duty statute cited by the
petitioners. The circuit court found that “[s]ince West Virginia Code 31B-4-409(a)(1) and (2)(a)(b) and (c) do not exist, and thus are not valid law under which relief could be granted or under which duties could be assigned,” the petitioners failed to properly state a claim that Mr. Beam had engaged in a breach of fiduciary duty toward the petitioners, and failed to properly state a claim that Mr. Beam had unlawfully converted the company‘s funds on deposit with City National. Additionally, the circuit court found that the petitioners had failed to “specifically allege, with any particularity whatsoever, any specific acts of ‘conversion‘” of Mountaineer Fire property by Mr. Beam, had failed to “show a prima facie case of tortious interference,” and had failed to properly state a claim for fraud. The circuit court therefore dismissed all of the petitioners’ claims against Mr. Beam.
In the second order, the circuit court dismissed the three counterclaims asserted by the petitioners against City National, granted City National‘s request for interpleader, and permitted City National to pay the proceeds of Mountaineer Fire‘s bank accounts into the court. First, the circuit court found that the petitioners failed to state a claim for breach of contract because they had failed to “identify a single term of the contract allegedly breached” by City National. Further, based upon City National‘s interpretation of the account documents attached to the motion to dismiss, the circuit court found that City National had “breached no term of any contract relative to” the petitioners. The circuit court also found that there can be no claim for breaching the implied covenant of good faith and fair dealing independent from a breach of the written contract.
As to the petitioners’ second counterclaim, that City National had aided and abetted Mr. Beam‘s breach of his fiduciary duties, the circuit court concluded that a bank has no duty to monitor depository accounts and, therefore, the petitioners could not prevail on their claim. Similarly, on the petitioners’ final counterclaim that City National had aided and abetted Mr. Beam‘s tortious interference, the circuit court found that the petitioners “identify no contractual or business relationships alleged to have been interfered with by Defendant Beam[.]” Further, the circuit court noted that all of the parties were in contractual relationships with one another, and “one cannot tortiously interfere with one‘s own relationship.” Accordingly, the circuit court concluded that the petitioners had failed to state a claim against City National upon which relief could be granted and dismissed all three claims.
The petitioners now appeal the circuit court‘s September 26, 2018, orders dismissing the petitioners’ pleading, pursuant to
II. Standard of Review
A circuit court‘s decision that a complaint fails to state a claim on which relief can be granted is a ruling of law, and we review such a decision de novo. See Syl. Pt. 2, State ex rel. McGraw v. Scott Runyan Pontiac-Buick, Inc., 194 W. Va. 770, 461 S.E.2d 516 (1995) (“Appellate review of a circuit court‘s order granting a motion to dismiss a complaint is de novo.“).
The parties’ arguments in this appeal challenge the circuit court‘s interpretation and application of
The petitioners contend that the circuit court erred in granting respondents’ motions to dismiss pursuant to
Additionally, the petitioners challenge City National‘s decision to attach documents to its
We begin by outlining, in detail, the parameters of
A. Rule 12(b)(6)
Taken as a whole, the
[t]he intent and effect of the rules is to permit the claim to be stated in general terms; the rules are designed to discourage battles over mere form of statement and to sweep away the needless controversies which the [common law] codes permitted that served either to delay trial on the merits or prevent a party from having a trial because of mistakes in statement.
Advisory Committee Report, October, 1955, Note to
“The primary purpose of this Court in adopting and promulgating the
cases that are “wildly inconsistent.” See generally, McCauley v. City of Chicago, 671 F.3d 611, 622 (7th Cir. 2011) (Hamilton, Judge, dissenting, in part).
However,
Under West Virginia law, when measuring the sufficiency of a complaint, “all that is required by a plaintiff is ‘fair notice.‘” Roth v. DeFeliceCare, Inc., 226 W. Va. 214, 220 n.4, 700 S.E.2d 183, 189 n.4 (2010) (quoting Scott Runyan Pontiac-Buick, Inc., 194 W. Va. at 776, 461 S.E.2d at 522). We continue to firmly abide by this standard. See, e.g., Goldstein v. Peacemaker Properties, LLC, 241 W. Va. 720, 730, 828 S.E.2d 276, 286 (2019) (“West Virginia remains a notice-pleading state.“).
in the rules of common law pleading.” Barker v. Traders Bank, 152 W. Va. 774, 780, 166 S.E.2d 331, 335 (1969).
In light of the purpose behind the Rules of Civil Procedure, this Court has steadfastly held that, to survive a motion under
“[A] trial court should not dismiss a complaint where sufficient facts have been alleged that, if proven, would entitle the plaintiff to relief.” Cantley v. Lincoln Cty. Comm‘n, 221 W. Va. at 470, 655 S.E.2d at 492. Hence, dismissal under
Stated differently, “a complaint is sufficient against a motion to dismiss under
if the court can reasonably read the pleadings to state a valid claim on which the plaintiff could prevail, it should do so despite the plaintiff‘s failure to cite proper legal authority, his confusion of various legal theories, his poor syntax and sentence construction, or his unfamiliarity with pleading requirements.
Fresquez v. Minks, 567 F. App‘x 662, 664 (10th Cir. 2014).
Finally, a pleading is only required to provide “fair notice of what the plaintiff‘s claim is and the grounds upon which it rests.” Leatherman v. Tarrant Cty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168 (1993). See also Refrigerated Trans., Inc. v. North Carolina Occidental Fire and Cas. Co., 705 F.2d 821, 825 (6th Cir. 1983) (The function of a pleading is “to give the opposing party fair notice of the nature and basis or grounds for a claim, and a general indication of the type of litigation involved.“). “This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims.” Swierkiewicz, 534 U.S. at 512. See also Sticklen v. Kittle, 168 W. Va. 147, 163, 287 S.E.2d 148, 157 (1981) (“Such simplified ‘notice pleading’ is made possible by the liberal opportunity for discovery and the other pretrial procedures established by the Rules to disclose more precisely the basis of both claim and defense and to define more narrowly the disputed facts and issues.“).
Having stated these guidelines, we wish to make one point clear: our simplified pleading standard is not an excuse for “carelessly drafted or baseless pleading[s].” Stricklen, 168 W. Va. at 164, 287 S.E.2d at 157-58. Importantly,
is certifying that to the best of his knowledge, information, and belief formed after an inquiry reasonable under the circumstances that . . . the claims, defenses, and other legal contentions therein are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.
(Emphasis added). A court may, on its own initiative, “call out” behavior by an attorney or self-represented litigant that appears to violate
B. Claims against Respondent Beam
The petitioners argue that the circuit court erred in granting Mr. Beam‘s motion to dismiss the petitioners’ crossclaims. In his summary response, Mr. Beam asserts that the petitioners “filed carelessly drafted, unsupported, nonsensical and spurious pleadings,” and that dismissal of the pleading was warranted. To resolve this dispute, we, like the circuit court, assess the allegations made by the petitioners.
The petitioners’ pleading repeatedly alleges that respondent Joe Beam opened a City National checking account in 2013 without the knowledge of or authorization from Mountaineer Fire, Brian Cavender, and Walter Cavender. West Virginia‘s laws regarding member-managed limited liability companies like Mountaineer Fire specifically provide that “[e]ach member has equal rights in the management and conduct of the company‘s business[.]”
Moreover, the petitioners’ pleading also alleges that Mr. Beam presented City National with the unauthorized, partially-completed 2013 Resolution suggesting that only Mr. Beam had authority over Mountaineer Fire‘s accounts. The pleading indicates that as a result of this “unauthorized revocation of Brian Cavender‘s authority over all [of] Mountaineer Fire‘s deposit accounts and funds on deposit . . . Brian Cavender could no longer confirm Mountaineer Fire‘s deposits of its sales income or payments made[.]” The pleading continues that, without notice to or permission from the petitioners, Mr. Beam “made undisclosed and unapproved distributions in payment to his related business interests for services,” actions the plaintiffs indicate violated
In the first, specific count of their pleading against Mr. Beam, the petitioners averred generally that Mr. Beam committed multiple violations of the fiduciary duties owed to Mountaineer Fire and the Cavenders.
The petitioners’ second count generally alleges that “Joe Beam‘s acts and omissions as described herein constitute the unlawful conversion of Mountaineer Fire‘s funds” on deposit with City National. “The tortious or unlawful taking of personal property,
We pause here to note that the circuit court focused on a typographic blunder by the petitioners in both of their first two counts against Mr. Beam. The petitioners asserted that, “[f]or purposes presented here the duty of loyalty and the duty of care . . . include the duties set forth under
Like the petitioners’ second count, the third count also alleges conversion. The petitioners’ pleading describes that when Mountaineer Fire was formed in 2011, Brian Cavender contributed $100,000 of fire safety rescue equipment to the company, as well as two vehicles and other equipment. Their pleading asserts that Mr. Beam secretly “sold equipment owned by Mountaineer Fire that had been contributed by Brian Cavender and failed to disclose these sales or account for payments received or deliver the payments received to Mountaineer Fire.” The petitioners claim Mr. Beam‘s acts and omissions “constitute an unlawful conversion of personal property for his personal use and/or benefit and/or the use and/or benefit of his related business interest[s.]”
Mr. Beam argues that the circuit court correctly found that the petitioners failed to “specifically allege, with any particularity whatsoever, any specific acts of ‘conversion[.]‘” We note, however, that
The fourth crossclaim asserted by the petitioners was that Mr. Beam‘s acts and omissions “constitute tortious interference with Mountaineer Fire‘s business operation[s]” following Mr. Beam‘s agreement to withdraw as a member of Mountaineer Fire. The petitioners claim that after Mr. Beam withdrew from the company, Mr. Beam continued to use Mountaineer Fire‘s checking account to make deposits and to disburse money to himself. The pleading alleges that Mr. Beam‘s actions forced Mountaineer Fire to materially breach a commission contract with a third party, and adversely and materially affected the company‘s relationship with that third party. The pleading also alleges
The circuit court dismissed this counterclaim because the petitioners had failed “to allege the necessary elements so as to show a prima facie case of tortious interference,” ostensibly because the petitioners identified no contractual or business relationship that was interfered with by Mr. Beam. We have held that, to establish a prima facie claim of tortious interference, a plaintiff must show:
- existence of a contractual or business relationship or expectancy;
- an intentional act of interference by a party outside that relationship or expectancy;
- proof that the interference caused the harm sustained; and
- damages.
Syllabus Point 2, in part, Torbett v. Wheeling Dollar Sav. & Tr. Co., 173 W. Va. 210, 314 S.E.2d 166 (1983). However, a plaintiff is not required to establish a prima facie case at the pleading stage. Instead, the circuit court should examine the allegations as a whole to determine whether they call for relief on any possible theory, and it may not dismiss a complaint where sufficient facts have been alleged that, if proven, would entitle the plaintiff to relief.
We have carefully examined the allegations regarding tortious interference in the petitioners’ pleading and, while we do not find them to be models of artful drafting, we do find that they sufficiently allege facts that, if proven, would entitle the petitioners to relief. The petitioners have alleged that Mr. Beam intentionally interfered with business relationships and expectancies, particularly after Mr. Beam left Mountaineer Fire, acts that harmed Mountaineer Fire‘s business prospects.
Finally, we examine the petitioners’ last crossclaim against Mr. Beam which alleges fraud. This is the one count in the pleadings that gives us pause.
(1) that the act claimed to be fraudulent was the act of the defendant or induced by him; (2) that it was material and false; that plaintiff relied upon it and was justified under the circumstances in relying upon it; and (3) that he was damaged because he relied upon it.
Syl. pt. 1, in part, Lengyel v. Lint, 167 W. Va. 272, 280 S.E.2d 66 (1981).
However, pleading a claim of fraud is substantially different from proving a claim of fraud. A plaintiff does not need to prove a claim of fraud at the pleading stage; rather he needs to articulate the claim with enough particularity so that the defending party can properly respond. The petitioners’ fraud count is sparse, and says nothing more than that Mr. Beam‘s “acts and/or omissions described herein constitute fraud[.]” Standing alone, we might hold that this count fails to meet the heightened pleading requirements of
In summary, Mr. Beam failed to establish beyond doubt that the petitioners’ pleading does not state a claim upon which relief may be granted. We therefore reverse the circuit court‘s order dismissing the petitioners’ crossclaims.
C. Claims against Respondent City National
To reiterate, City National initiated this case with a complaint for interpleader. City National contends that this case is nothing more than a dispute between the Cavenders on one side and Mr. Beam on the other, haggling over around $5,130 in Mountaineer Fire‘s checking accounts. City National asserts it has “no dog in this fight,” that it wants to deposit the money with the circuit court, and then be dismissed.
The petitioners’ pleading, however, asserts that City National bears some responsibility for Mr. Beam‘s actions. As we noted, City National promptly moved, pursuant to
As we have extensively discussed above,
If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.
The general rule is, therefore, that circuit courts considering motions under
Only matters contained in the pleading can be considered on a motion to dismiss under Rule 12(b) R.C.P., and if matters outside the pleading are presented to the court and are not excluded by it, the motion should be treated as one for summary judgment and disposed of under Rule 56 R.C.P. if there is no genuine issue as to any material fact in connection therewith. . . .
Syl. pt. 4, in part, United States Fid. & Guar. Co. v. Eades, 150 W. Va. 238, 144 S.E.2d 703 (1965) (overruled on other grounds by Sprouse v. Clay Commc‘n, Inc., 158 W. Va. 427, 211 S.E.2d 674 (1975)). See also Franklin D. Cleckley, Robin J. Davis, & Louis J. Palmer, Jr., Litigation Handbook on West Virginia Rules of Civil Procedure § 12(b)(6)[3], at 354 (3d ed. 2008) (“Only matters contained in the pleading can be considered on a motion to dismiss under Rule 12(b)(6). However, if matters outside the pleading are presented to the court and are not excluded by it, the motion must be treated as one for summary judgment and disposed of under Rule 56.“).
This Court has recognized, however, a limited exception to this rule: a court may review documents annexed to a pleading.
the complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference. Even where a document is not incorporated by reference, the court may nevertheless consider it where the complaint “relies heavily upon its terms and effect,” which renders the document “integral” to the complaint . . . .
[G]enerally, the harm to the plaintiff when a court considers material extraneous to a complaint is the lack of notice that the material may be considered. Accordingly, where plaintiff has actual notice of all the information in the movant‘s papers and has relied upon these documents in framing the complaint the necessity of translating a Rule 12(b)(6) motion into one under Rule 56 is largely dissipated. . . . [O]n a motion to dismiss, a court may consider “documents attached to the complaint as an exhibit or incorporated in it by reference, . . . matters of which judicial notice may be taken, or . . . documents either in plaintiffs’ possession or of which plaintiffs had knowledge and relied on in bringing suit. Because this standard has been misinterpreted on occasion, we reiterate here that a plaintiff‘s reliance on the terms and effect of a document in drafting the complaint is a necessary prerequisite to the court‘s consideration of the document on a dismissal motion; mere notice or possession is not enough.
Forshey v. Jackson, 222 W. Va. at 748, 671 S.E.2d at 753 (quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 152–53 (2d Cir. 2002) (cleaned up)). As one court stated succinctly
When, as now, a complaint‘s factual allegations are expressly linked to — and admittedly dependent upon — a document (the authenticity of which is not challenged), that document effectively merges into the pleadings and the trial court can review it in deciding a motion to dismiss under Rule 12(b)(6).
Beddall v. State St. Bank & Tr. Co., 137 F.3d 12, 17 (1st Cir. 1998). See also, Zak v. Chelsea Therapeutics Int‘l, Ltd., 780 F.3d 597, 606–07 (4th Cir. 2015) (“Consideration of a document attached to a motion to dismiss ordinarily is permitted only when the document is integral to and explicitly relied on in the complaint, and when the plaintiffs do not challenge the document‘s authenticity.” (Cleaned up)); Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006) (When considering a motion to dismiss, “[a] court may consider evidence on which the complaint ‘necessarily relies’ if: (1) the complaint refers to the document; (2) the document is central to the plaintiff‘s claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion.“); Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (“[A] court may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff‘s claims are based on the document.“). This rule is necessary because, “[o]therwise, a plaintiff with a legally deficient claim could survive a motion to dismiss simply by failing to attach a dispositive document on which it relied.” Pension Ben. Guar. Corp., 998 F.2d at 1196.
Before relying on extraneous materials attached to a motion to dismiss, a trial court must be assured that the authenticity of the materials is undisputed. If the materials are of questionable provenance or are subject to competing interpretations, courts should avoid factoring them into their equation. “[A] ruling on a motion for dismissal pursuant to Rule 12(b)(6) is not an occasion for the court to make findings of fact.” Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007). Further, the trial court must ensure that the pleading party had notice of the extraneous materials.
A finding that plaintiff has had notice of documents used by defendant in a 12(b)(6) motion is significant since, as noted earlier, the problem that arises when a court reviews statements extraneous to a complaint generally is the lack of notice to the plaintiff that they may be so considered; it is for that reason — requiring notice so that the party against whom the motion to dismiss is made may respond — that Rule 12(b)(6) motions are ordinarily converted into summary judgment motions. Where plaintiff has actual notice of all the information in the movant‘s papers and has relied upon these documents in framing the complaint the necessity of translating a Rule 12(b)(6) motion into one under Rule 56 is largely dissipated.
Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991).
We therefore hold that, when a movant makes a motion to dismiss a pleading pursuant to
A question remains, however, as to what standard of review applies to a circuit court‘s decision to review a document outside the pleadings. As noted above, cases have consistently recognized that a trial court can or may, but is not required to, consider documents outside of the pleadings. In other words, consideration of documents outside the pleadings is discretionary. Accordingly, we conclude that a circuit court‘s decision whether or not to review a document outside of the pleadings, which is attached to a motion to dismiss pursuant to
We now turn to the three categories of documents City National attached to its motion to dismiss. First, City National attached copies of the 2011 and 2013 Resolutions. The record indicates that City National provided copies of the resolutions to the petitioners before litigation commenced. Moreover, in drafting their pleading, the petitioners specifically relied upon, and quoted extensively from, both resolutions. Hence, the circuit court was absolutely within its discretion to consider both resolutions when making its decision.
Second, City National attached copies of account documentation, including applications signed by Brian Cavender and Mr. Beam in 2011, and signed by Mr. Beam alone in 2013. These applications incorporate contractual terms. City National provided copies of this account documentation to the petitioners before litigation began. In drafting their pleading, the petitioners made repeated references to the “Authorized Account” (the 2011 account) and the “Unauthorized Account” (the 2013 account). The petitioners also noted that the documents included copies of Mountaineer Fire‘s articles of organization and copies of the 2011 and 2013 Resolutions. The petitioners otherwise made no specific reference to these documents.
City National, however, contends that the petitioners generally relied on those documents to state their breach of contract claim. After examining the petitioners’ pleading as a whole, we agree. The petitioners shaped many of the allegations in their pleading using those documents. Accordingly, the circuit court did not abuse its discretion in considering the account documents.
Third, City National incorporated copies of canceled checks and account statements into its motion to dismiss as well as a later reply. City National noted that the petitioners repeatedly claimed in their pleading that they were unaware Mr. Beam had opened the 2013 account. However, City National argued that the petitioners knew about the account and that their claim was “fraudulent.” In support, City National produced copies of checks drawn against the 2013 account that were signed by Mr. Beam on
We find it was improper for City National to have included the checks and bank statements in its motion to dismiss, and it was an abuse of discretion for the circuit court to have considered them in any fashion. The petitioners’ counterclaims did not refer to these documents, and the documents were not integral to the petitioners’ allegations. More significantly, the parties were substantially at odds regarding the interpretation to be given to the documents. City National proffered the documents to show the petitioners were “bad actors,” while the petitioners (who had never seen many of the documents and had no notice of their contents) viewed the documents as additional evidence of City National‘s and Mr. Beam‘s liability. The circuit court should have rejected City National‘s proffer of these documents or converted the motion to dismiss into one for summary judgment under
We now turn to the petitioners’ contention that the circuit court erred in dismissing their three counterclaims against City National under
We concede that the petitioners’ claim is poorly drafted. However, as we discussed earlier in this opinion, a plaintiff pleading a claim has no duty to plead a prima facie case. In other words, a plaintiff has no duty to specify precisely which term or paragraph of the contract was breached in order to properly state a claim; a plaintiff must only provide fair notice of what the plaintiff‘s claim is and the grounds upon which it rests.
Generally, a plaintiff alleging breach of contract is required only to state a sufficient
factual basis for the claim to put the defendants on notice and allow them to frame a response. Thus, a complaint in an action on a contract which alleges the contract, performance by the plaintiff, and failure to perform on the part of the defendant, resulting in damage to the plaintiff, is good against a motion to dismiss for insufficiency. Specifics of the contract, such as the date it was formed and specifics of the contract‘s terms and transactions made under the contract, need not be pled.
61A Am. Jur. 2d Pleading § 208. See also Tracy Bateman, et al., 27 Federal Procedure L. Ed. § 62:62 (2020). Viewing the pleading as a whole, the petitioners alleged that they made an agreement with City National that the 2011 Resolution gave Brian Cavender authority over any Mountaineer Fire checking account. The pleading further asserts that, despite that agreement, after May 2017 City National refused Brian Cavender‘s requests to close the 2013 account or to pay out the proceeds of the account. The petitioners also claim that, because Mr. Beam continued to use that account, they suffered damages due to City National‘s refusal to abide by the resolution. Moreover, City National cannot, and does not, plead surprise, confusion, or lack of notice regarding the breach claim; its entire argument is based on the poor quality of drafting in the petitioners’ pleading. We therefore conclude that the petitioners properly stated a claim for breach of contract and of the duty of good faith and fair dealing.10
The second count of the petitioners’ pleading is that City National aided and abetted Mr. Beam‘s breach of his fiduciary duties to Mountaineer Fire and the Cavenders. The petitioners have sufficiently alleged that Mr. Beam had statutorily imposed fiduciary duties, and that he breached those duties. They have further alleged that Mr. Beam used the 2013 account at City National to accomplish his misdeeds, and that City National knew about the misconduct. Moreover, after May 2017, despite no longer being part of the company, the petitioners allege City National did nothing to stop Mr. Beam but, instead, allowed the misconduct to continue. The circuit court, however, did not address these contentions. It simply concluded that City National had no fiduciary duty to monitor its accounts and could not be held liable. We find the circuit court‘s conclusion to be clearly wrong. The petitioners are not asserting City National violated a fiduciary duty; they claim City National assisted a third party in breaching the third party‘s duty. Viewing the counterclaims as a whole, the petitioners asserted that (1) Mr. Beam breached his corporate, fiduciary duties toward Mountaineer Fire, (2) City National knew or should have known he was acting against the interests of Mountaineer Fire, and (3) City National assisted that breach. We find the petitioners have stated a claim upon which relief could be granted and, therefore, permit the claims to be developed below.11
We find the circuit court erred in dismissing the third count of the petitioners’ pleading against City National. The pleading identifies contracts or business relationships that are separate from the agreements between the petitioners and Mr. Beam, or between City National, Mr. Beam and the petitioners. For example, the petitioners allege that Mr. Beam converted $55,000 from the sale of a fire truck, causing Mountaineer Fire to breach an agreement to pay a $10,000 commission to a third party. Mr. Beam also appears to have pursued a collection action against a customer of Mountaineer Fire‘s without authorization, and in the process destroyed the petitioners’ business relationship with that customer and with similar customers nearby. The petitioners contend that Mr. Beam could not have accomplished these tortious acts without assistance from City National and the 2013 account. We therefore conclude that the petitioners have sufficiently alleged a claim for aiding and abetting tortious interference.
IV. Conclusion
In summary, we find that the petitioners’ pleading stated a sufficient basis upon which relief could be granted if the facts, as alleged, are proven. Respondents failed to show beyond doubt that the petitioners can prove no set of facts in support of their claims which would entitle them to relief.
Accordingly,
Reversed and remanded.
Notes
a complaint and an answer; a reply to a counterclaim denominated as such; an answer to a cross-claim, if the answer contains a cross-claim; a third-party complaint, if a person who was not an original party is summoned under the provisions of Rule 14; and a third-party answer, if a third-party complaint is served. No other pleading shall be allowed, except that the court may order a reply to an answer or a third-party answer.
(a) The only fiduciary duties a member owes to a member-managed company and its other members are the duty of loyalty and the duty of care imposed by subsections (b) and (c) of this section.
(b) A member‘s duty of loyalty to a member-managed company and its other members is limited to the following:
(1) To account to the company and to hold as trustee for it any property, profit or benefit derived by the member in the conduct or winding up of the company‘s business or derived from a use by the member of the company‘s property, including the appropriation of a company‘s opportunity;
(2) To refrain from dealing with the company in the conduct or winding up of the company‘s business as or on behalf of a party having an interest adverse to the company; and
(3) To refrain from competing with the company in the conduct of the company‘s business before the dissolution of the company.
(c) A member‘s duty of care to a member-managed company and its other members in the conduct of and winding up of the company‘s business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law.