Khan Bros., Inc. v. City of Charlotte

Khan Bros., Inc. v. City of Charlotte, 2015 NCBC 23.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
MECKLENBURG COUNTY 14 CVS 10933

KHAN BROTHERS, INC., d/b/a
DIAMOND CAB,

Plaintiff,

v.

CITY OF CHARLOTTE, a North
Carolina Municipal Corporation, ORDER AND OPINION
PATRICK CANNON, in his capacity as
Council member and Mayor for the City
of Charlotte and individually, THE
GREATER CHARLOTTE
HOSPITALITY AND TOURISM
ALLIANCE d/b/a HTA, TAXI USA, LLC
d/b/a YELLOW CAB, CROWN CAB
COMPANY, INC. and CITY CAB, LLC,

Defendants.

{1} THIS MATTER is before the Court upon Defendants City of Charlotte
(“City”), Patrick Cannon (“Cannon”), The Greater Charlotte Hospitality and
Tourism Alliance (“HTA”), Taxi USA, LLC (“Yellow Cab”), Crown Cab Company,
Inc. (“Crown Cab”), and City Cab, LLC’s (“City Cab”) (collectively, “Defendants”)
respective Motions to Dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the North
Carolina Rules of Civil Procedure (the “Motions”) in the above-captioned case. After
considering the Motions, briefs in support of and in opposition to the Motions, and
the arguments of counsel at a hearing on January 9, 2015,1 the Court hereby
GRANTS the Motions solely on Rule 12(b)(1) grounds and DISMISSES Plaintiff’s
claims with prejudice.
Thurman, Wilson, Boutwell & Galvin P.A. by James Galvin and Alexander W.
Warner for Plaintiff Khan Brothers, Inc.

1 The Court heard the parties’ arguments together with those of the parties in the companion case,

Universal Cab Co., Inc. v. City of Charlotte, et al., No. 14 CVS 10914. Contemporaneously with the
entry of this Order and Opinion, the Court enters a separate Order and Opinion on the Motions filed
in the Universal Cab case.
Leila Z. Lahbabi, Theodore A. Kaplan, and Elizabeth E. Smithers for Defendants
City of Charlotte and Patrick Cannon, in his official capacity.

Ferguson, Chambers & Sumter, P.A. by James E. Ferguson, II for Defendant
Patrick Cannon, in his individual capacity.

Womble Carlyle Sandridge & Rice, LLP by Meredith J. McKee and Brandi N.
Smith for Defendant Taxi USA, LLC.

Rabon Law Firm by Gary W. Jackson for Defendant Crown Cab Company.

Rawls, Scheer, Foster, Mingo & Culp, PLLC by Amanda A. Mingo for Defendant
The Greater Charlotte Hospitality and Tourism Alliance.

McNaughton Law, PLLC by Edward J. McNaughton for Defendant City Cab,
LLC.

Bledsoe, Judge.
I.
PROCEDURAL AND FACTUAL BACKGROUND
{2} The Court limits its recitation of the background to the facts and
allegations that are relevant for purposes of resolving the present Motions.
{3} Plaintiff Khan Brothers, Inc. d/b/a/ Diamond Cab (“Plaintiff”) is a North
Carolina corporation that provides taxi service in the Charlotte area. (Am. Compl.
¶ 1.)
{4} Defendants Yellow Cab, Crown Cab, and City Cab (collectively “the Cab
Defendants”) are also taxi service providers in the Charlotte, North Carolina area.
(See id. ¶¶ 5–7.)
{5} Defendant City “is a municipal corporation organized under the laws of
North Carolina” and owner and operator of Charlotte Douglas International Airport
(“the Airport”). (Id. ¶ 2.) Defendant Cannon, at the times relevant to the causes of
action, was “a member of the Defendant City’s Council, the City’s Mayor Pro Tem,
chairman of the City’s Community Safety Committee, and an HTA board member,
and is made a defendant in both his individual and official capacities.” (Id. ¶ 3.)
{6} Defendant HTA is a non-profit corporation with its principal place of
business in Charlotte, North Carolina. (Id. ¶ 4.)
{7} Plaintiff filed its Complaint on June 13, 2014 in Mecklenburg County.
This case was designated as a complex business case on July 14, 2014, assigned to
this Court (Gale, J.) on July 21, 2014, and subsequently re-assigned to the
undersigned on November 19, 2014.
{8} Plaintiff filed its Amended Complaint on August 8, 2014, alleging claims
against Defendants in various combinations for breach of covenant of good faith and
fair dealing, unfair and deceptive trade practices (“UDTP”), negligence, constructive
fraud, monopolizing and attempting to monopolize – N.C. Gen. Stat. § 75-2.1
(“antitrust”), interference with contract, violation of the North Carolina
Constitution Article I § 19 (“equal protection”), declaratory judgment, punitive
damages, civil conspiracy, and violation of the Racketeer Influenced and Corrupt
Organizations Act (“N.C. RICO”). (Id. ¶¶ 28–126.)
{9} The following allegations, drawn from the Amended Complaint, form the
basis of Plaintiff’s claims:
a. Prior to June 14, 2011, Plaintiff provided taxi service at the Airport
pursuant to a Taxicab Operating Agreement. (Id. ¶ 12.) Only passenger vehicle
companies with operating agreements are permitted to provide on-demand taxi
service at the Airport. (Id. ¶ 11.) Because a majority of taxi rides originate from
Airport taxi service, the ability to pick up passengers at the Airport is a
“mainstay of income for passenger vehicle for hire companies in the City” and is
essential for fair competition in Charlotte. (Id. ¶¶ 15, 17.)
b. Prior to and during June 2011, Defendants Cannon and HTA allegedly
conspired to increase Yellow Cab’s share of licenses for Airport taxi service. (Id.
¶ 29.) Yellow Cab members have donated “tens of thousands of dollars to
campaigns for Patrick Cannon with the intent of getting him to use his public
office and influence with the Airport to have Yellow Cab named as the only
company with licenses to pick up at the Airport.” (Id. ¶ 30.)
c. Cannon, HTA, and Yellow Cab convinced the Airport to seek a
reduction in Airport taxi service providers. (Id. ¶¶ 31–32.) The City issued a
request for proposals (“RFP”) from Airport taxi service providers who wished to
continue providing service at the Airport. (Id. ¶ 33.)
d. Plaintiff alleges that “HTA, Yellow Cab and Patrick Cannon agreed to
facilitate a scheme whereby the right to operate at the Airport could be
purchased by way of making campaign contributions to Patrick Cannon or
providing ‘membership dues’ to HTA.” (Id. ¶ 35.)
e. “The City Council was the entity with the ultimate authority to enter
into and approve the operating agreements with the three companies.” (Id. ¶
37.) The City Council tasked its Public Safety Committee with investigation and
recommendation of Airport taxi service providers. (Id. ¶ 38.) Cannon chaired
the Public Safety Committee at all relevant times. (Id. ¶ 39.)
f. Mohammad Jenatian (“Jenatian”), the President of the HTA, and a
representative of Cannon allegedly approached multiple cab companies and
solicited contributions to HTA and Cannon’s political campaign in exchange for
agreements to provide Airport taxi service. (Id. ¶¶ 41–42.) Plaintiff did not
contribute. (Id. ¶ 45.)
g. The Cab Defendants “gave more money to HTA and to campaigns for
Patrick Cannon than any other companies” (Id. ¶ 58) “in furtherance of [an]
agreement to provide gifts/money to a public official in exchange for the award of
a public contract.” (Id. ¶ 59.)
h. In June 2011, the City declined to award Plaintiff a new Taxicab
Operating Agreement and granted exclusive Airport Taxicab Operating
Agreements to Yellow Cab, Crown Cab, and City Cab. (Id. ¶ 23.) Plaintiff
alleges the City’s refusal to award Plaintiff a new Taxicab Operating Agreement
was not in good faith. (Id. ¶ 24.)
i. In May 2013, prior to the awarding of Taxicab Operating Agreements
to the Cab Defendants, Plaintiff was again approached by Jenatian to contribute
to HTA and Cannon’s political campaign in exchange for Cannon’s agreement to
“use his position as Chair of the Public Safety committee to award the Airport
contracts.” (Id. ¶¶ 46–50.) Plaintiff again refused to contribute. (Id. ¶ 55.) The
City renewed its Taxicab Operating Agreements with the Cab Defendants in
2014. (Id. ¶ 25.)
j. Plaintiff alleges that “other employees and persons appointed by the
City to take part in the process of awarding the Airport Contracts were also
involved in the conspiracy to allow Patrick Cannon and HTA to ultimately pick
who would be awarded the contracts.” (Id. ¶ 62.)
k. Plaintiff alleges that “[t]he City’s actions in depriving Plaintiff of the
right to provide its services at the Airport stem from a process rife with
corruption, bribes, and favoritism.” (Id. ¶ 26.)
{10} Defendants filed their Motions to Dismiss between October 9, 2014 and
October 13, 2014.2 Plaintiff filed its Responses in Opposition to the Motions to
Dismiss (the “Responses”) on October 29 and 30, 2014. Defendants Crown Cab and
Yellow Cab filed Replies to Plaintiff’s Responses on November 10, 2014.
{11} The Court held a hearing on this matter on January 9, 2015, at which all
parties were represented by counsel. The Motions are now ripe for resolution.
II.
ANALYSIS
{12} Defendants’ Motions seek dismissal of Plaintiff’s Amended Complaint
pursuant to N.C.R.C.P. 12(b)(1) for lack of standing and 12(b)(6) for failure to state
a claim. Because Plaintiff’s claims and the arguments supporting and opposing
Defendants’ Motions to Dismiss are substantially similar to the claims brought and
the arguments supporting and opposing the Motions to Dismiss filed in Universal
Cab Co., Inc. v. City of Charlotte, et al., No. 14 CVS 10914, the Court relies heavily
in this Order and Opinion on the analysis set forth in the Court’s Order and
Opinion in the Universal action (2015 NCBC 22) filed contemporaneously herewith.
{13} As “[s]tanding is a necessary prerequisite to a court’s proper exercise of
subject matter jurisdiction,” Neuse River Foundation v. Smithfield Foods, Inc., 155

2 Defendant Cannon filed his Motion to Dismiss in his individual capacity at the hearing on January

9, 2015, largely adopting the arguments of the other Defendants. Defendant City Cab has not filed a
Motion to Dismiss, but contended at the hearing that dismissal of any of the other Defendants
warranted dismissal of City Cab.
N.C. App. 110, 113, 574 S.E.2d 48, 51 (2002), the Court first addresses Defendants’
Rule 12(b)(1) standing arguments. See, e.g., In re T.B., 200 N.C. App. 739, 742, 685
S.E.2d 529, 531–32 (2009) (standing “is a threshold issue that must be addressed,
and found to exist, before the merits of [the] case are judicially resolved.”)
(quotations omitted).
{14} “Whenever it appears by suggestion of the parties or otherwise that the
court lacks jurisdiction of the subject matter, the court shall dismiss the action.”
N.C.G.S. § 1A-1, Rule 12(h)(3) (2014). On a motion under Rule 12(b)(1), the Court
may consider and weigh matters outside the pleadings in determining its subject
matter jurisdiction. Tart v. Walker, 38 N.C. App. 500, 502, 248 S.E.2d 736, 737
(1987).
{15} “As the party invoking jurisdiction, plaintiff[] ha[s] the burden of
establishing standing,” Queen’s Gap Cmty. Ass’n, Inc. v. McNamee, 2011 NCBC 36
¶ 13 (N.C. Super. Ct. Sept. 23, 2011),
www.ncbusinesscourt.net/opinions/11_NCBC_36.pdf (dismissing action for lack of
standing) (quoting Marriot v. Chatham Cnty., 187 N.C. App. 491, 494, 654 S.E.2d
13, 16 (2007)), by “show[ing] facts that if accepted as true would demonstrate the
existence of jurisdiction.” Grasinger v. Williams, 2015 NCBC 5 ¶ 16 (N.C. Super. Ct.
Jan. 15, 2015), www.ncbusinesscourt.net/opinions/2015_NCBC_5.pdf (granting in
part and denying in part motion to dismiss for lack of standing); Am. Woodland
Indus., Inc. v. Tolson, 155 N.C. App. 624, 627, 574 S.E.2d 55, 57 (2002) (“The burden
is on the plaintiff to demonstrate that the requirement of standing is satisfied.”).
{16} The Court will only grant a Rule 12(b)(1) motion “‘if the material
jurisdictional facts are not in dispute and the moving party is entitled to a judgment
as a matter of law.’” Wilkie v. Stanley, 2011 NCBC 11 ¶ 7 (N.C. Super. Ct. Apr. 20,
2011), www.ncbusinesscourt.net/opinions/2011_NCBC_11.pdf (denying motion to
dismiss for lack of standing).
{17} In Neuse River Foundation, our Court of Appeals set out a three-step
process for determining a plaintiff’s standing to assert a claim: (1) “‘injury in fact’ –
an invasion of a legally protected interest that is (a) concrete and particularized and
(b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly
traceable to the challenged action of the defendant; and (3) it is likely, as opposed to
merely speculative, that the injury will be redressed by a favorable decision.” 155
N.C. App. at 113, 574 S.E.2d at 51 (quoting Lujan v. Defenders of Wildlife, 504 U.S.
555, 560 (1992)).
{18} Defendants contend that Plaintiff cannot satisfy the second element
required to establish standing: an injury fairly traceable to Defendants’ alleged
conduct. Specifically, Defendants assert that the Charlotte City Council was the
body with the sole authority to approve contracts for Airport taxi service, and, as
such, any injury suffered by Universal on the facts as alleged was the result of the
votes of at least eight independent members of the eleven-member City Council,
none of whom are defendants or are alleged to have acted improperly or illegally in
voting to award the Taxicab Operating Agreements to the Cab Defendants.3
Causal Connection between Plaintiff’s Injury and Defendants’ Conduct
{19} An injury is fairly traceable to the challenged conduct when a causal
connection exists “between the injury and the conduct complained of” and the injury
is “not . . . the result [of] the independent action of some third party not before the
court.” Lujan, 504 U.S. at 560; see, e.g., Hamm v. Blue Cross & Blue Shield of N.C.,
2010 NCBC 14 ¶ 34 (N.C. Super. Ct. Aug. 27, 2010),
www.ncbusinesscourt.net/opinions/2010_NCBC_14.pdf (“For an injury to be fairly
traceable to the challenged action of the defendant, it must not be the result of the
independent action of a third party not before the court.”).
{20} Here, Plaintiff’s claimed injury is the lost profits Plaintiff alleges it would
have realized had the City elected to award Plaintiff a new Taxicab Operating
Agreement for service at the Airport. Plaintiff seeks to hold Defendants liable for
this economic loss by alleging that Defendants implemented the RFP process using

3 The City Council approved the Taxicab Operating Agreements with the Cab Defendants by a nine-

to-two vote, with Defendant Cannon voting in the majority.
illegal and wrongful means, with the intended result that Plaintiff not be awarded a
new Agreement.
{21} The Court concludes, however, that Plaintiff’s allegations establish that a
causal connection does not exist between the alleged injury about which Plaintiff
complains and Defendants’ alleged conduct. Although Plaintiff has alleged that
Defendants engaged in numerous nefarious and wrongful acts that caused
Plaintiff’s loss, it is undisputed that the decision that caused Plaintiff’s alleged
injury was the eleven-member Charlotte City Council’s decision not to award
Plaintiff a new Taxicab Operating Agreement. (Am Compl. ¶ 37.) Indeed, Plaintiff
admits that “[t]he City Council was the entity with the ultimate authority to enter
into and approve the operating agreements with the three companies.” (Id.)
{22} The only member of the eleven-member City Council that Plaintiff has
sued or contends acted wrongfully in casting his or her vote in connection with the
Taxicab Operating Agreements is Defendant Cannon. Plaintiff attempts to create
the requisite causal connection by alleging in conclusory fashion that “[t]he City
Council tasked its Public Safety Committee with investigation and recommendation
of Airport taxi service providers,” (Id. ¶ 38), and that Defendant Cannon agreed to
“use his position as Chair of the Public Safety [C]ommittee to award the Airport
contracts” to those taxi companies that purchased corporate memberships in HTA
and contributed to Cannon’s political campaign. (Id. ¶¶ 46–50.)
{23} Plaintiff, however, does not allege any facts or offer any evidence to
support its conclusory assertions concerning the City Council’s alleged deference to
Cannon or the Public Safety Committee in awarding the Agreements. Plaintiff’s
conclusory allegations are not sufficient to survive a challenge under Rule 12(b)(1).
See Neuse River Found., 155 N.C. App. at 113, 574 S.E.2d at 51 (“Since [the
elements of standing] are not mere pleading requirements but rather an
indispensable part of the plaintiff’s case, each element must be supported in the
same way as any other matter on which the plaintiff bears the burden of proof, i.e.,
with the manner and degree of evidence required at the successive stages of the
litigation.”); Venable v. GKN Automotive, 107 N.C. App. 579, 584, 421 S.E.2d 378,
381 (1992) (affirming 12(b)(1) dismissal where plaintiff’s allegations were
“conclusory in nature”); see also, e.g., Burgess v. Charlottesville Sav. & Loan Ass’n,
477 F.2d 40, 43 (4th Cir. 1973) (“Mere conclusory allegations in the complaint are
insufficient to support jurisdiction.”).
{24} Plaintiff has not alleged or offered evidence that any Councilmember,
other than Defendant Cannon, received bribes or other unlawful inducements from
any Defendant, and Cannon is the only Councilmember Plaintiff has elected to sue.
Plaintiff has not alleged or offered evidence that the City Council vote to approve
the Agreements was improper, illegal or invalid, or that any member of the City
Council, other than Defendant Cannon, acted with any ill will, malice or improper
motive against Plaintiff or had any improper connection to any Defendant.
{25} Furthermore, the quid pro quo agreements Plaintiff alleges involved
payments of money by the Cab Defendants to HTA and Defendant Cannon, neither
of whom, Plaintiff admits, made the decision to approve or deny the Taxicab
Operating Agreements.
{26} Similarly, Plaintiff alleges that Defendant Cannon controlled the City
Council’s Community Safety Committee, but it is undisputed that Cannon could
cast only one of the five votes on the Committee, and Plaintiff does not allege or
offer any evidence that any of the other members of the Committee received
unlawful inducements to cast their votes for the Cab Defendants or that the
Committee’s vote was illegal or improper.
{27} In sum, Plaintiff has not alleged facts, or offered any evidence that shows,
that the decision by the Charlotte City Council to award the Taxicab Operating
Agreements to the Cab Defendants and to decline to award Plaintiff a new
Agreement was the result of anything other than the independent action of the
Charlotte City Council, consistent with its legal authority, and acting within its
reasonable discretion, to approve or deny the Agreements. Consequently, the Court
concludes, based on the allegations and evidence of record, that the alleged injury
about which Plaintiff complains – i.e., the economic losses flowing from the City
Council’s decision not to award Plaintiff a new Taxicab Operating Agreement – was
caused by the independent, legal and valid action of the Charlotte City Council and
not by the improper actions of any Defendant.
{28} Because Plaintiff therefore has not shown a causal nexus between its
alleged injury and Defendants’ alleged conduct, Plaintiff does not have standing to
bring its claims. See, e.g., AMOCO v. AAN Real Estate, LLC, 754 S.E.2d 844, 846
(N.C. Ct. App. 2014) (dismissing for lack of standing where “the amended complaint
did not sufficiently show that plaintiff suffered an injury as a result of the alleged
lease breach by defendant”); McCracken & Amick, Inc. v. Perdue, 218 N.C. App.
455, 721 S.E.2d 455 (2012) (unpublished) (dismissing claims on Rule 12(b)(1)
grounds because injury “still cannot be traced to and does not arise out of the
challenged conduct”); see, e.g., Credigy Receivables, Inc. v. Whittington, 202 N.C.
App. 646, 658, 689 S.E.2d 889, 897 (2010) (affirming award of attorneys’ fees under
N.C.G.S. § 6-21.5 where plaintiff had no standing to bring suit because it failed to
connect defendant to bad debt); see also, e.g., Frank Krasner Enters. v. Montgomery
Cnty., 401 F.3d 230, 235 (4th Cir. 2005) (“We have previously denied standing
because the actions of an independent third party, who was not a party to the
lawsuit, stood between the plaintiff and the challenged actions.”).
Actual or Imminent Injury v. Conjectural or Hypothetical Injury
{29} The Court further concludes that there also exist intervening factors, that
Plaintiff ignores, which the Court finds preclude a conclusion on the facts alleged
that Plaintiff has suffered an “actual or imminent, not conjectural or hypothetical”
injury sufficient to establish standing. See Neuse River Found., 155 N.C. App. at
113, 574 S.E.2d at 51 (identifying standard). In particular, Plaintiff ignores the
presence of the other losing bidders in the RFP process and simply assumes it would
have been awarded a contract but for Defendants’ allegedly wrongful acts. It is
undisputed, however, that Plaintiff was competing not only against the Cab
Defendants, but also against five additional competitors for one of the three
available Taxicab Operating Agreements. It is simply a matter of speculation and
conjecture that Plaintiff would have been awarded a new Taxicab Operating
Agreement had Defendants’ alleged misconduct not occurred. Similarly, given
Plaintiff’s attack on the RFP process itself, it is also a matter of speculation and
conjecture how the process would have been structured but for Defendants’ alleged
misconduct, and further, whether Plaintiff would have been selected through these
unknown, yet-to-be-determined, alternative procedures.
{30} As a result, it appears to the Court that but for Defendants’ alleged
misconduct, Plaintiff’s bid would have been one of presumably nine bids (assuming
all nine bidders and no others elected to respond to any revised selection process
not “controlled” by HTA or Cannon) that would have been evaluated under
discretionary criteria by the City Council, the eleven members of which would rely
upon their own individual subjective assessments of the bidders’ relative
qualifications, experience, written and oral presentations, and overall ability to
provide the best taxi service at the Airport, in casting their votes to approve the
awarding of the Taxicab Operating Agreements. The Court cannot conclude that
Plaintiff’s likely success in this speculative alternative scenario is sufficiently
certain to warrant a finding that Plaintiff has suffered an “actual or imminent”
injury under prevailing precedent.
{31} To the contrary, on the facts here, the Court concludes that Plaintiff’s
alleged injury is merely “conjectural or hypothetical” and cannot support Plaintiff’s
standing to assert its claims. See, e.g., In re Ezzell, 113 N.C. App. 388, 393, 438
S.E.2d 482, 485 (1994) (dismissing claims for lack of standing because alleged injury
was “conjectural or hypothetical” where plaintiff magistrate contended alternative
removal process without involvement of district attorney would have yielded
different result); Beachcomber Props., LLC v. Station One, Inc., 169 N.C. App. 820,
825, 611 S.E.2d 191, 194 (2005) (dismissing claims for lack of standing where
alleged injury was “conjectural or hypothetical” because plaintiff was “without a
legally protected interest in the property” at issue); see generally Strates Shows,
Inc. v. Amusements of America, Inc., 379 F. Supp. 2d 817 (E.D.N.C. 2005)
(dismissing NC RICO claim for failure to show proximate causation where plaintiff
was not selected in allegedly corrupt competitive bidding process involving
administrative discretion and multiple bidders).
{32} Accordingly, for the reasons set forth above, the Court concludes that
Plaintiff’s claims should be dismissed with prejudice for lack of subject matter
jurisdiction. See, e.g., AMOCO, 754 S.E.2d at 845 (“A party that lacks standing to
bring a claim constitutes an insurmountable bar to recovery.”).
III.
CONCLUSION
{33} For the foregoing reasons, the Court hereby GRANTS Defendants’
Motions to Dismiss under Rule 12(b)(1) of the North Carolina Rules of Civil
Procedure and DISMISSES Plaintiff’s claims against all Defendants with prejudice.
{34} In light of the Court’s determination that it does not have subject matter
jurisdiction over this action, the Court does not reach or consider Defendants’
Motions to Dismiss for failure to state a claim under N.C.R.C.P. 12(b)(6).

SO ORDERED, this the 5th day of March 2015.