Before the Court is Plaintiff MeadWestvaco’s (hereinafter “MWV” or “Plaintiff”) S.C.R.C.P. 12(b)(6) Motion to Dismiss Defendant/Counterclaimant Rayonier’s Fourth Counterclaim for Unfair Trade Practices filed under Section 39-5-10, et seq. of the South Carolina Code of Laws (2008), as Amended, known as the South Carolina Unfair Trade Practices Act.  MWV asserts that Rayonier’s cause of action under the South Carolina Unfair Trade Practices Act (hereinafter “SCUTPA”) should be dismissed based on a choice-of-law analysis. According to the Plaintiff, the choice-of-law provision existing in the Purchase Agreement, “[t]his Agreement shall be interpreted and construed in accordance with the laws of the State of Georgia,” requires this Court to apply Georgia law to all claims asserted between the parties.

When ruling upon a motion to dismiss for failure to state facts sufficient to constitute a cause of action, the Court is required to accept the allegations set forth in Rayonier’s counterclaim.  Doe v. Greenville County Sch. Dist., 375 S.C. 63, 66-67, 651 S.E.2d 305, 307 (2007).  Likewise, the Court must deny a motion to dismiss if the facts alleged, and any inferences drawn from them, would allow relief under any theory.  Id.  When ruling upon a plaintiff’s motion to dismiss pursuant to Rule 12(b)(6), the trial judge must base its decision solely upon the allegations contained in the Defendant’s counterclaim.  See Stiles v. Onorato, 318 S.C. 297, 457 S.E.2d 601 (1995); see also Brown v. Leverette, 291 S.C. 364, 353 S.E.2d 697 (1987) (stating that trial court’s ruling on a motion for failure to state a claim must be based solely upon the allegations set forth on the face of the complaint).  If this Court cannot make a choice-of-law analysis without considering facts and documents outside the pleadings, Plaintiff’s motion to dismiss does not meet this burden and must fail.  In this matter in order to conduct a complete choice-of-law analysis, this Court must necessarily consider facts and documents outside the pleadings.  As a result, Plaintiff’s 12(b)(6) motion to dismiss must be denied.

Futhermore, when this Court views only the allegations and all inferences drawn from them in the light most favorable to Rayonier, as required under the Rule 12(b)(6) standard, it finds that Rayonier’s SCUTPA claim is embroidered with the contract and MWV’s failure to perform under the Agreement.  See e.g., Counterclaim ¶ 246 (“When MWV decided in late 2009 that the Agreement had become too costly for it to continue, MWV employed its pretext about the Fernandina soap to leverage the market power it had acquired over Rayonier, and others in the region, in its effort to forcibly renegotiate the Agreement, and, failing that,  to walk away from its contract obligations.”). When viewed in the light most favorable to Rayonier, Rayonier’s SCUTPA claim would not exist but for MWV’s alleged failure to perform under the contract.  As a result, Plaintiff’s 12(b)(6) motion to dismiss must be denied.

In determining what substantive law may apply to the various claims that exist in this case, this Court must follow the choice-of-law rules applicable to South Carolina.  As stated in Witt v. American Trucking Associations, Inc., 860 F.Supp. 295, 300 (D.S.C. 1994):

South Carolina adheres to common law choice of law rules.  In contract actions, South Carolina courts apply the substantive law of the place where the contract at issue was formed.  See, e.g., O’Briant v. Daniel Constr. Co., 279 S.C. 254, 305 S.E.2d 241, 243 (1983).  This rule applies where a contract’s formation, interpretation or validity is at issue.  However, where performance is at issue, as it is here, the law of the place of performance governs.  Livingston v. Atlantic Coast Line R.R. Co., 176 S.C. 385, 180 S.E. 343, 345 (1935).  In tort actions, South Carolina courts apply the law of the place where the wrong occurred.  See, e.g., Dawkins v. South Carolina, 306 S.C. 391, 412 S.E.2d 407 (1991).

(emphasis added).  Thus, South Carolina distinguishes between contractual claims pertaining to a contract’s formation, interpretation or validity versus claims relating to performance under the contract.

Choice-of-law clauses in contracts are “generally” honored by South Carolina courts.  Team IA, Inc. v. Lucas, 395 S.C. 237, 248, 717 S.E.2d 103, 108 (Ct. App. 2011), cert. granted (Dec. 6, 2012); see Nucor Corp. v. Bell, 482 F.Supp.2d 714, 728 (D.S.C. 2007).  Plaintiffs have argued that the Team IA decision stands for the proposition that, if there is a contractual choice-of-law provision, it governs all claims between the parties regardless of how they arose.  This Court does not read the Team IA decision so broadly.  The Team IA decision addresses a choice-of-law provision in the very narrow context of contract interpretation and validity.  Specifically, the court addressed a motion for partial summary judgment in a breach of contract action with respect to the interpretation of the non-solicitation and non-competition provisions contained therein.  At no time does the court in Team IA discuss the scope of the choice-of-law provision. Furthermore, the choice-of-law provision in Team IA is broader than the provision in the instant action because it includes the terms that the agreement “shall be governed by.”

In applying South Carolina choice-of-law principles, this Court finds that the choice-of-law provision contained within the Purchase Agreement between the parties shall be honored.  However, the Court must analyze the choice-of-law provision to determine its applicability to the various claims.  This Court finds no South Carolina cases that addressed the scope of a choice-of-law provision containing the same language as set forth in the Purchase Agreement between these parties.  The U.S. Fourth Circuit has held that “the scope of the choice-of-law provision, however, being a matter of contract interpretation, must be determined by the law of the state chosen by the parties to the contract.”  Bunker Holdings, Ltd. v. Green Pacific A/S, 346 F.App’x. 969, 973 (4th Cir. 2009); Milanovich v. Costa Crociere, S.P.A., 954 F.2d 763, 767 (D.C. Circuit 1992).  Georgia, the state the parties chose to interpret the terms of the Agreement, construes this choice-of-law language narrowly and states this provision applies only to interpretation and construction of the actual terms of the Agreement, and not to issues arising from contractual performance or statutory authority.  Brown v. Moe’s Sw. Grill, LLC, CIV.A. 1:07-CV741RWS, 2009 WL 5175280, at *3 (N.D. Ga. Dec. 21, 2009); see also Young v. W.S. Badcock Corp., 222 Ga. App. 218, 474 S.E.2d 87, 88 (1996), and Baxter v. Fairfield Fin. Servs., Inc., 307 Ga. App. 286, 292, 704 S.E.2d 423, 428 (2010).  This interpretation is also consistent with South Carolina common law that distinguishes between claims for a contract’s formation and interpretation and claims based upon performance or torts.  Therefore, it is the finding of this Court that under South Carolina choice-of-law analysis, the choice-of-law provision contained in the Purchase Agreement should be narrowly construed.  Georgia substantive law shall be applied to all issues pertaining to the contract’s formation, interpretation, or validity.  However, the choice-of-law provision does not apply to contractual claims based upon performance, torts, or other statutory claims.

This Court found no South Carolina case determining whether SCUTPA should be treated as a contractual claim or tort claim in conducting a choice-of-law analysis.  Courts outside of the State have determined whether an unfair trade practices claim is a contract or tort on a case-by-case basis. Courts consistently examine the specific facts of a case to determine whether a claim under a consumer protection statute should be treated as a tort or a contract action for choice of law purposes.  In re Bridgestone/Firestone, Inc. Tires Products Liab. Litig., 155 F. Supp. 2d 1069, 1079 (S.D. Ind. 2001); see also Lyon v. Caterpillar, Inc., 194 F.R.D. 206, 213 (E.D.Pa. 2000) (noting that claims under consumer fraud statutes may be based either in tort or contract law, and finding that “tort law is more appropriately applied considering the facts of this case”) (emphasis added).  Courts have found that an unfair trade practices claim may trigger a conflict of law analysis where the claim is essentially an “embroidered” contract claim.  Crellin Technologies, Inc., 18 F.3d 1, 12 (1st Cir. 1994) (quoting Ne. Data Sys., Inc. v. McDonnell Douglas Computer Sys. Co., 986 F.2d 607, 609 (1st Cir. 1993)).  Thus, unfair trade practices act claims “can be treated either as contract or tort claims.”  Conagra, Inc. v. Arkwright Mut. Ins. Co., 64 F. Supp. 2d 754, 767 (N.D. Ill. 1999); Compare Ne. Data Sys. Inc., 986 F.2d 607 (1st Cir. 1993) (treating an unfair trade practices claim as a contract claim for choice-of-law purposes) with Crellin Technologies, Inc., 18 F.3d 1 (1st Cir. 1994) (treating an unfair trade practices claim as a tort for choice-of-law purposes).

When this Court views only the allegations and all inferences drawn from them in the light most favorable to Rayonier, as required under the Rule 12(b)(6) standard, it finds that Rayonier’s SCUTPA claim is embroidered with the contract and MWV’s failure to perform under the Agreement.  See e.g., Counterclaim ¶ 246 (“When MWV decided in late 2009 that the Agreement had become too costly for it to continue, MWV employed its pretext about the Fernandina soap to leverage the market power it had acquired over Rayonier, and others in the region, in its effort to forcibly renegotiate the Agreement, and, failing that, to walk away from its contract obligations.”). When viewed in the light most favorable to Rayonier, its SCUTPA claim would not exist but for MWV’s alleged failure to perform under the contract.  As a result, Plaintiff’s 12(b)(6) motion to dismiss must be denied.

Moreover, MWV’s 12(b)(6) Motion necessarily requires this Court to conduct a choice-of-law analysis looking to the specific facts of this case to determine whether Rayonier’s SCUTPA claim is one based in contract or tort.  Because this Court must look to facts outside of the pleadings to make such a determination, Plaintiff’s 12(b)(6) motion to dismiss is an inappropriate vehicle for performing this choice-of-law analysis and therefore the motion must be denied.

Because Rayonier’s SCUTPA claim, when viewed in the light most favorable to Rayonier, is contractual in nature and based upon Plaintiff’s failure to perform, the Court applies South Carolina choice-of-law principles to determine whether South Carolina or Georgia law governs Rayonier’s SCUTPA claim.  Pursuant to South Carolina common law, “where performance is at issue, as it is here, the law of the place of performance governs.”  Witt v. Am. Trucking Associations, Inc., 860 F. Supp. 295, 300 (D.S.C. 1994); Lister v. Nationsbank of Delaware, N.A., 329 S.C. 133, 144-45 (1997); see also, Scudder v. Union Nat. Bank of Chicago, 91 U.S. 406, 23 L. Ed. 245 (1875) (“Matters bearing upon the execution, interpretation, and validity of a contract are determined by the law of the place where it is made. Matters connected with its performance are regulated by the law prevailing at the place of performance.”).  When determining where the final acts of performance occur, the Court should apply the law of the state where “the ultimate delivery and acceptance of the merchandise” occurs.  Keco Indus., Inc. v. ACF Indus., Inc., 316 F.2d 513, 514 (4th Cir. 1963).

Pursuant to the Purchase Agreement, MWV conducted quality inspections and had the right to refuse shipments with lower acid numbers in South Carolina.  (Purchase Agreement, §§ 5, 12)  MWV clearly contemplated extensive and expensive testing of the product in South Carolina.  (Jordahl Dep., Exh. 7, MWV-412)  Furthermore, MWV retained the right to terminate the Agreement after the product arrived in South Carolina if MWV determined that the acid number had fallen below 135 for two consecutive quarters.  (Purchase Agreement, ¶ 12)  In addition, payment for product was calculated on a per-shipment basis in South Carolina, and samples of the product were to be gathered in South Carolina for testing and ultimate approval.  (Id., §§ 5, 10, 12)  Financial penalties could be assessed in South Carolina against Rayonier based upon the outcome of these tests.  (Id., ¶ 7)  These factual allegations support Rayonier’s contention that South Carolina was the state of ultimate delivery and acceptance of the merchandise and that South Carolina law should apply to its SCUTPA claim.

Again, this Court notes that MWV’s 12(b)(6) Motion necessarily requires this Court to conduct a choice-of-law analysis looking to the specific facts of this case to determine where performance occurred.  Because this Court must look to facts outside of the pleadings to make such a determination, Plaintiff’s 12(b)(6) motion to dismiss is an inappropriate vehicle for performing this choice-of-law analysis and, therefore, the motion must be denied.

Rayonier asserts that its claim under SCUTPA is contractual in nature based upon a failure to perform for the purposes of choice-of-law analysis. Although no case in South Carolina has held that SCUTPA is a tort, Plaintiff has asserted in the alternative that the SCUTPA claim would be a tort.  Still, a 12(b)(6) motion to dismiss remains the inappropriate motion for such a choice-of-law analysis.  To make a determination of the place where the wrong occurred in a tort action necessitates looking at facts and evidence outside of the pleadings.  Therefore, if this Court were to make a determination that Rayonier’s SCUTPA claim was a tort, which it has not, Plaintiff’s motion would still be denied.

Plaintiff’s 12(b)(6) motion to dismiss Rayonier’s SCUTPA claim based upon choice-of-law must fail.  This Court when ruling upon a motion to dismiss pursuant to Rule 12(b)(6) must base its decision solely upon the allegations contained in the pleadings.  This Court cannot make an appropriate choice-of-law analysis in this case without considering facts and documents outside the pleadings.  Therefore, Plaintiff’s motion to dismiss is hereby DENIED.

IT IS SO ORDERED.

July 15, 2013
Charleston, South Carolina