Janis v. Wefald et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
FRANKLIN CHARLES WEFALD
DEBTOR
CASE NO.
10-08068-8-SWH
ERIC JANIS
Plaintiff
v.
FRANKLIN CHARLES WEFALD and
MILLENNIA CARDIOVASCULAR, P.A..
Defendants.
ADVERSARY PROCEEDING NO.
10-00266-8-SWH-AP
MEMORANDUM OPINION REGARDING MOTION FOR SUMMARY JUDGMENT
The matter before the court in this adversary proceeding is the motion of the defendant
Millennia Cardiovascular, P.A. (“Millennia”) for summary judgment on plaintiff Eric Janis’
(“Janis”) complaint. Hearings took place in Raleigh, North Carolina, on August 11 and 15, 2011.
SO ORDERED.
SIGNED this 12 day of October, 2011.
________________________________________
Stephani W. Humrickhouse
United States Bankruptcy Judge
____________________________________________________________
Case 10-00266-8-SWH Doc 85 Filed 10/12/11 Entered 10/12/11 16:00:01 Page 1 of 8

In an order entered September 8, 2011, the court granted the motion for summary judgment in favor
of Millennia. This memorandum opinion sets out the basis for that ruling.
Jurisdiction
The bankruptcy court has jurisdiction over the parties and the subject matter of this
proceeding pursuant to 28 U.S.C. §§ 151, 157, and 1334, and the General Order of Reference
entered by the United States District Court for the Eastern District of North Carolina on August 3,
1984. Additionally, all parties expressly consented on the record to the entry of a final judgment
by this court.
Background
Dr. Franklin Charles Wefald (“Wefald”) filed a petition for relief under chapter 11 of the
Bankruptcy Code on October 3, 2010. 	Janis filed a claim in the bankruptcy case and also, on
October 20, 2010, initiated an adversary proceeding against Wefald and Millennia, which is a
business of which Wefald is an employee, seeking to recover damages for defamation and a
determination that Janis’ claim is not dischargeable. 	Millennia filed an answer and various
counterclaims on December 13, 2010, to which Janis filed a reply on January 3, 2011.
Millennia filed the present motion for summary judgment on June 17, 2011, asserting that
there are no genuine issues of material fact concerning its alleged liability to Janis for defamation
and that it should be granted judgment as a matter of law. More specifically, Millennia states that
there is no evidence that any of the statements at issue were made within the scope of Wefald’s
duties and responsibilities as an employee and as the sole owner of Millennia. In fact, Millennia
states, Wefald’s alleged actions were outside the scope and course of Wefald’s duties as an
2
Case 10-00266-8-SWH Doc 85 Filed 10/12/11 Entered 10/12/11 16:00:01 Page 2 of 8

employee of Millennia, and with respect to those actions, he had no apparent authority to act on
behalf of Millennia.
Plaintiff maintains that evidence exists to find that Wefald had apparent authority to act on
behalf of Millennia and thus summary judgment is inappropriate.
Discussion
“[S]ummary judgment is proper ‘if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of law.’” Celotex Corp.
v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552 (1986). In making this determination, conflicts
are resolved by viewing all facts and inferences to be drawn from the facts in the light most
favorable to the non-moving party. U.S. v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 994
(1962) (per curiam). Summary judgment is not a “disfavored procedural shortcut,” but an important
mechanism for filtering out “claims and defenses [that] have no factual basis.” Celotex, 477 U.S.
at 327, 106 S. Ct. at 2555. “[A] complete failure of proof concerning an essential element of the
non-moving party’s case necessarily renders all other facts immaterial.” 	Id. at 323, 106 S. Ct.
at 2552.
The court will first assess the sufficiency of the pleadings under the standard set out in Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974 (2007), and later fleshed out
in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). In Twombly, the court held that a complaint must
include “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S.
at 570, 127 S. Ct. at 1974. The Court fleshed out this standard in Iqbal establishing first that “the
tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable
3
Case 10-00266-8-SWH Doc 85 Filed 10/12/11 Entered 10/12/11 16:00:01 Page 3 of 8

to legal conclusions,” and second that “only a complaint that states a plausible claim for relief
survives a motion to dismiss.” 	Iqbal, 129 S. Ct. at 1950. 	The allegations must be more than a
“formulaic recitation of the elements” of a claim. Id. at 1951. “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. at 1949.
In this adversary proceeding, the only allegation in the complaint referencing Millennia is
that “[Wefald] was acting within the scope and course of his duties and responsibilities as an
employee and owner of Defendant Millennia Cardiovascular, P.A.” when defamatory statements
were made by Wefald in (1) a draft letter dated November 1, 2009; (2) a letter dated January 6,
2010; and (3) a radio broadcast on November 25, 2009. Compl. ¶ 6. There are no allegations in the
complaint connecting Millennia to the specific defamatory statements. Although there is a basis for
dismissal of the complaint for insufficiency of pleading, the court will proceed to the merits of the
issue for the purposes of summary judgment.
At the hearing, Plaintiff conceded that Millennia had no involvement in the two letters and
that his defamation claims against Millennia are based solely on the radio show. Thus, the court
must determine whether Janis can show that the alleged defamatory statements by Wefald on the
radio show can be properly attributed to Millennia. This issue, in turn, depends upon the existence
of either an agency relationship or apparent authority.
“An agent is one who, with another’s authority, undertakes the transaction of some business
or the management of some affairs on behalf of such other, and to render an account of it.” Phelps-
Dickson Builders, L.L.C. v. Amerimann Partners, 172 N.C. App. 427, 435, 617 S.E.2d 664, 669
(2005). “There are two essential ingredients in the principal-agent relationship: (1) authority, either
4
Case 10-00266-8-SWH Doc 85 Filed 10/12/11 Entered 10/12/11 16:00:01 Page 4 of 8

express or implied, of the agent to act for the principal, and (2) the principal’s control over the
agent.” Id. Assuming an agency relationship, “liability of a principal for the torts of his agent may
arise in three situations: (1) when the agent’s act is expressly authorized by the principal; (2) when
the agent’s act is committed within the scope of his employment and in furtherance of the principal’s
business; or (3) when the agent’s act is ratified by the principal.” Mercier v. Daniels, 139 N.C.
App. 588, 591, 533 S.E.2d 877, 880 (2000) (citing Hogan v. Forsyth Country Club Co., 79 N.C.
App. 483, 491, 340 S.E.2d 116, 121 (1986)).
Additionally, the doctrine of apparent authority allows a principal to be held liable for acts
of its agent. Liability may exist whether or not the agent, in the agency relationship, possessed
actual authority for certain acts. Phelps-Dickson, 172 N.C. App. at 435, 617 S.E.2d at 669. “This
doctrine holds ‘a principal who represents to a third party that another is his agent is liable for harm
caused the third party by the apparent agent if the third party justifiably relied on the principal’s
representation.’” Sweatt v. Wong, 145 N.C. App. 33, 41, 549 S.E.2d 222, 227 (2001) (internal
citations omitted) (emphasis added). “Whether or not the agent is acting within the apparent scope
of his authority must be determined by what the principal has done, not by the unratified acts and
declarations of the agent.” Zimmerman v. Hogg & Allen, P.A., 286 N.C. 24, 31, 209 S.E.2d 795,
799 (1974). “If the facts and circumstances of the particular case reveal that an ordinarily prudent
man would have been put on notice that one with whom he was dealing was not acting within the
apparent scope of his authority, the principal is not bound under well-settled principles of agency
law.” Id.
Plaintiff argues that alleged defamatory statements made by Wefald on the radio show called
“Heart to Heart,” which aired in Smithfield, North Carolina, on November 25, 2009, are attributable
5
Case 10-00266-8-SWH Doc 85 Filed 10/12/11 Entered 10/12/11 16:00:01 Page 5 of 8

to Millennia on two bases: (1) there was an agency relationship between Wefald and Millennia and
Wefald acted within the scope of that relationship; and/or (2) the doctrine of apparent authority, i.e.
Wefald had apparent authority to act on behalf of Millennia on the radio show. Janis contends that
the agency relationship and apparent authority are supported by the following: (1) the final
comments made by the radio announcer connecting Wefald to Millennia; (2) a letter from the radio
announcer to Wefald and Janis stating, “I am uncomfortable in a paid radio broadcast that I am
moderating for Millennia Cardiovascular;” and (3) a magazine article about Millennia which
included a picture showing Wefald on the “Heart to Heart” radio show. 	Plaintiff’s Opposition to
Summary Judgment, Exhibits A-B.
There is no dispute that Wefald had authority to act on behalf of Millennia in an agency
capacity. But, there are also no facts indicating that Wefald’s actions were expressly authorized by
Millennia, nor are there facts indicating that Millennia ratified Wefald’s actions. Mercier, 139 N.C.
App. at 591, 533 S.E.2d at 880. The question is whether the specific defamatory statements made
on the radio show were within the scope of his employment with Millennia and in furtherance of its
business or made with apparent authority.
Plaintiff fails to demonstrate that Wefald acted within the scope and course of his
employment at Millennia during the radio show broadcast. 	Aside from the mere conclusory
assertion that Wefald was so acting, plaintiff has presented no evidence to bring into dispute a
material fact. Plaintiff simply asserts that Wefald must be within his employment if he is the owner
of Millennia. There is no evidence that these alleged defamatory statements are related to the work
that Wefald is employed to do for Millennia. In fact, the evidence that has been presented indicates
the statements were motivated by a personal purpose and not by a purpose to further Millennia’s
6
Case 10-00266-8-SWH Doc 85 Filed 10/12/11 Entered 10/12/11 16:00:01 Page 6 of 8

business. Further, Wefald paid for the radio show through a personal draw from Millennia, not a
business draw. At no point during the radio show did Wefald appear to be promoting Millennia.
The facts as alleged cannot establish that Wefald was within the scope of his employment at
Millennia when the alleged statements were made.
Plaintiff next relies on the agency principle of apparent authority. Again, plaintiff fails to
present evidence of apparent authority. There are no facts establishing that Millennia, the principal,
manifested through its own actions that Wefald’s participation on the radio show was within
Wefald’s apparent authority. Plaintiff relies only on the final comments by the radio announcer
connecting Wefald to Millennia, and the announcer’s letter addressed to Millennia. Additionally,
plaintiff relies on the magazine picture. 	All of these facts represent actions by a third party
connecting Wefald to Millennia. There are no facts showing that Millennia held out Wefald as its
agent possessing apparent authority on the radio show. Thus, a third party would not be justified
in believing that the radio show was within Wefald’s agency authority. Acts on the part of radio
show personnel, or the magazine picture, do not establish actions by Millennia supporting apparent
authority.
The court notes that in many instances, the establishment of apparent authority relates to
what constitutes the ordinary course of business for the principal. See Zimmerman, 286 N.C. at 32,
209 S.E.2d at 800 (recognizing the principle that apparent authority of a corporation’s president is
largely dependent on the corporation’s ordinary course of business, and subsequently applying this
principle to its own facts to determine “whether the receipt of funds for investment purposes falls
within the scope of the practice of law, and therefore within the scope of apparent authority”).
Millennia is a medical practice. Plaintiff did not allege in the complaint and presented no evidence
7
Case 10-00266-8-SWH Doc 85 Filed 10/12/11 Entered 10/12/11 16:00:01 Page 7 of 8

to establish that Wefald’s participation on a radio show was within Millennia’s ordinary course of
business. There are no facts to establish Wefald had apparent authority.
Because plaintiff has not shown how Wefald’s statements could have been made within the
scope of Wefald’s employment or pursuant to apparent authority, there is no basis for attributing
Wefald’s statements to Millennia and summary judgment on behalf of Millennia is warranted. For
those reasons, the motion for summary judgment was granted.
SO ORDERED.
END OF DOCUMENT
8
Case 10-00266-8-SWH Doc 85 Filed 10/12/11 Entered 10/12/11 16:00:01 Page 8 of 8