Pate Flagship LLC et al v. Cypress Equities Southeast LLC et al
MEMORANDUM OPINION. Signed by Magistrate Judge John E Ott on 2/26/2015. (PSM)
2015 Feb-26 AM 10:54
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
PATE FLAGSHIP, LLC, and,
CYPRESS EQUITIES SOUTHEAST, LLC,
CHRISTOPHER C. MAGUIRE,
SCOTT HARRINGTON, and
CARLYLE-CYPRESS TUSCALOOSA I, LLC,
Before the court are the defendants’ motions to dismiss the plaintiffs’ amended
complaint. (Docs. 24, 26, 32).1 The motions have been fully briefed. Upon due consideration,
the court finds that the motions are due to be granted.
Plaintiffs Pate Flagship, LLC (“Pate Flagship”) and Sealy, LLC (“Sealy”) entered into a
Purchase Agreement2 with Cypress Equities Southeast, LLC (“Cypress Equities”), Christopher
Document 24 is defendant Carlyle-Cypress Tuscaloosa I, LLC’s motion to dismiss.
Document 26 is defendants Cypress Equities Southeast, LLC and Scott Harrington’s “Joinder in
the Motion to Dismiss Amended Complaint and Brief in Support.” Document 32 is defendant
Christopher C. Maguire’s “Joinder in the Motion to Dismiss Amended Complaint and Brief in
Support” as well as his “Supplemental Motion to Dismiss” the Amended Complaint for the
plaintiffs’ failure to serve him within 120 days of the filing of the Complaint. Also before the
court is Carlyle-Cypress’s Motion for Oral Argument (document 45), which is mooted by the
court’s rulings herein.
The Purchase Agreement is located at document 24-1 in the Court’s electronic record of
C. Maguire (“Maguire”), and Scott Harrington (“Harrington”)3 for approximately 35 acres of real
property in Tuscaloosa, Alabama, on May 28, 2005. The Purchase Agreement was later
amended on September 27, 2005. Some time after the execution of the Purchase Agreement,
Cypress Equities assigned all rights under the Purchase Agreement to Carlyle-Cypress
Tuscaloosa I, LLC (“Carlyle Cypress”).
The Purchase Agreement, as amended, provided:
(e) Enhancement Interest. As additional part of the purchase price[,][Cypress
Equities] agrees to pay [plaintiffs] a sum equivalent to one-half of the
Enhancement Interest created on the Property as and when received by [Cypress
Equities]. For all purposes of this Agreement, “Enhancement Interest” shall be all
TIFF4 money or any other funds received by [Cypress Equities] from any
governmental entity or agency for, or TIFF money or any other funds spent by any
governmental entity or agency (in lieu of the receipt by [Cypress Equities] of TIFF
money or any such other funds from any governmental entity or agency), directly
or indirectly on, the proposed development, or the construction of any
infrastructure, landscaping or improvements of any kind whatsoever, during the
proposed development of the Property.
(Doc. 24-1 at 3).
In June 2008, the City of Tuscaloosa made a $1.5 million payment to Carlyle-Cypress for
developer public infrastructure improvements. (See Doc. 24-4). Because the City’s payment was
money “received ... from” or “spent by” a governmental entity during the “proposed development
of the property,” Carlyle-Cypress paid one-half of the amount received to the plaintiffs. (Doc. 25
Individual defendants Maguire and Harrington guaranteed Cypress Equities’ obligations
under the contract.
The parties agree that “TIF” is an abbreviation commonly used in the area of municipal
finance to refer to “tax-increment financing.” Tax-increment financing is “[a] technique used by
a municipality to finance commercial developments usually involving issuing bonds to finance
land acquisition and other up-front costs, and then using the additional property taxes generated
from the new development to service the debt.” (Doc. 25 at 14, n.1; Doc. 37 at 11-12)(quoting
Black’s Law Dictionary 1502 (8th ed. 2004)).
On December 22, 2005, President George W. Bush signed the Gulf Opportunity Zone Act
of 2005. The Act exempted from taxation the interest paid on certain bonds, referred to as GO
Zone bonds, used to finance private development projects in areas affected by Hurricane Katrina.
See Pub. L. No. 109-135 (relevant provision codified at 26 U.S.C. § 1400N(a)).
The plaintiffs assert that “[b]ecause of their tax exempt status, as qualified private activity
bonds under the Internal Revenue Code, [GO Zone bonds] were issued at significantly lower
interest rates than other taxable bonds or conventional financing”; and that any interest charges
saved through the use of GO Zone bonds are “Enhancement Interests,” to which they are entitled
to one-half of the saved amount. (Doc. 20 at ¶¶14-15). The plaintiffs further contend that the
defendants “applied for and received certain cash payments or services in kind from the City of
Tuscaloosa” that constitute “Enhancement Interests” to which they are entitled to one-half. (Doc.
20 at ¶¶ 17-18).
Ultimately, the plaintiffs contend that by taking the position that the aforementioned
“savings” and “certain cash payments” are not Enhancement Interests as defined by the Purchase
Agreement, the defendants have “anticipatorily breached their contractual obligations.” (Doc. 20
at ¶ 20). Consequently, the plaintiffs have sued the defendants for Accounting and Breach of
Contract (Count I) and Declaratory Judgment (Count II). (Doc. 20 at 7-8). The defendants assert
that all the claims fail as a matter of law for various reasons. (Docs. 24, 26, 32). Each
contention will be addressed below.
STANDARD OF REVIEW
Rule 12(b)(6) of the FEDERAL RULES OF CIVIL PROCEDURE authorizes a motion to dismiss
on the grounds that a complaint’s allegations fail to state a claim upon which relief can be
granted. A complaint must only contain “a short and plain statement of the claim showing that
the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). The defendants have filed their motions
to dismiss arguing that the plaintiffs’ allegations fail to state a claim upon which relief can be
granted. Such a motion tests only the sufficiency of the claim set out in the pleadings. Harris v.
Proctor & Gamble Cellulose Co., 73 F.3d 321, 324 (11th Cir. 1996). Thus, the “ ‘issue is not
whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to
support the claims.’ ” Little v. City of North Miami, 805 F.2d 962, 965 (11th Cir. 1986) (quoting
Scheur v. Rhodes, 416 U.S. 232, 236 (1974)). When ruling on a motion to dismiss, the court
must accept the factual allegations in the complaint as true and construe them in the light most
favorable to the plaintiff. Speaker v. U.S. Dep’t of Health & Human Servs., 623 F.3d 1371, 1380
(11th Cir. 2010). However, “courts ‘are not bound to accept as true a legal conclusion couched
as a factual allegation.’” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting
Papasan v. Allain, 478 U.S. 265, 286 (1986)); see also Ashcroft v. Iqbal, 556 U.S. 662, 678-79
(2009). Nor is it proper to assume that the plaintiff can prove facts it has not alleged or that the
defendants have violated the law in ways that have not been alleged. Twombly, 550 U.S. at 563
n.8 (citing Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519, 526 (1983)).
“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief requires
more than labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do.” Id., 550 U.S. at 555 (citations, brackets, and internal quotation marks omitted).
“Factual allegations must be enough to raise a right to relief above the speculative level ....” Id.
Thus, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face,’” i.e., its “factual content ... allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at
678 (citations omitted).
The defendants argue that the plaintiffs’ amended complaint is due to be dismissed for a
variety of reasons. The court agrees, as set out herein.
Breach of Contract
The defendants offer four bases for their assertion that the plaintiffs have failed to state a
claim for breach of contract on the GO Zone bonds. Because the court agrees with the
defendants that “any savings on interest payments could not be an enhancement interest,” it need
not address the other alternative arguments.5 (Doc. 25 at 13). Additionally, the defendants argue
that the plaintiffs have failed to state a claim on the purported Enhancement Interests provided by
the City of Tuscaloosa. (Id. at 18).
The GO Zone Bonds
Neither party disputes that the Purchase Agreement and Addendum are a valid contract.
When interpreting a contract, the court first looks to the plain language of the contract and
determines whether that language is ambiguous. “[A] court should give the terms of the
agreement their clear and plain meaning and should presume that the parties intended what the
The defendants also argue that: (1) the parties could not have intended Enhancement
Interest to include interest saved from the use of Go Zone bonds when Go Zone bonds did not
even exist at the time the Purchase Agreement and Addendum were executed; (2) the plaintiffs
failed to allege additional facts needed to establish that interest savings were an enhancement
interest; and (3) the plaintiffs’ claim is untimely.
terms of the agreement clearly state.” Ex parte Dan Tucker Auto Sales, Inc., 718 So. 2d 33, 36
(Ala. 1998) (citing Pacific Enters. Oil Co. (USA) v. Howell Petroleum Corp., 614 So. 2d 409
(Ala. 1993)). The parties do not dispute the applicable law concerning contracts; however, they
disagree as to its application in this case. The plaintiffs “believe the contract unambiguously
requires payment of one half of the benefits received or spent relating to the G[O] Zone bonds...”
Doc. 37 at 9). The defendants counter that “the alleged interest savings on GO Zone bonds are
not within th[e] contractual definition.” (Doc. 25 at 11).
As set out previously, the Addendum defines an Enhancement Interest as “all TIFF
money or any other funds received by [defendants] from any governmental entity or agency for,
or TIFF money or any other funds spent by any governmental entity or agency ....” (Doc. 24-2 at
2-3). In an effort to broaden the meaning of “Enhancement Interest,” the plaintiffs argue that
“[t]he contractual language unambiguously provides that [they] are entitled to half of any benefit
to the Defendants or any benefits given by the government, direct or indirect.” (Doc. 37 at 11).
This misreading of the plain contract language seems to be where the plaintiffs’ argument goes
awry. The contract does not define “Enhancement Interest” as any “benefit” at all. Instead, it
plainly states that “Enhancement Interest” shall be all “TIFF money or any other funds”
“received by the defendants” or “spent by” the government. The court agrees with the defendants
that this distinction is fatal to the plaintiffs’ position. The court is unwilling to broaden the plain
language of contract to include “benefits.” Thus, the plaintiffs’ assertion that amounts potentially
saved by the defendants as a result of lower interest rate bonds are Enhancement Interests fails.
Nothing in the plain language of the contract contemplates amounts saved. The defendants’
motion to dismiss is due to be granted as to the GO Zone Bonds.6
“Enhancement Interests” Created by City of Tuscaloosa
The plaintiffs also allege that the defendants “applied for and received certain cash
payments or services in kind” from the City of Tuscaloosa that also constitute “Enhancement
Interests.” (Doc. 20 at ¶ 17). The plaintiffs cite specific requisition numbers (9, 15, 21, 54, and
60) to which they purport to be entitled to one half of the value. (Id. at ¶ 18). Additionally, the
plaintiffs assert that they are entitled to one half of “the right of way acquisitions made by the city
to widen the streets to accommodate the project” and “the funds Carlyle-Cypress received for the
water line extension.” (Id.)
The defendants argue, however, that the plaintiffs have failed to plead their claims
sufficiently to show that any benefit allegedly provided by the City of Tuscaloosa falls within the
contractual definition of Enhancement Interest. (Doc. 25 at 21). Specifically, the defendants
assert that the plaintiffs do not allege facts showing that any of the Enhancement Interests
provided by the City of Tuscaloosa were “spent on the proposed development, or the
construction of any infrastructure, landscaping or improvements of any kind whatsoever,” or that
they were “received during the proposed development of the property.” (Id. at 22).
The plaintiffs retort that “[g]overnment enhancements that did not pay for a physical
benefit to property were unambiguously included in the definition of Enhancement Interest[;]”
and that the defendants’ claim to the contrary is “without support of contractual language or
To the extent the plaintiffs cite to and quote from statements made in the Congressional
Record about the Gulf Opportunity Zone Act, the court is not swayed. The “statutory text, not
the legislative history,” controls. Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546,
law.” (Doc. 37 at 19). In arguing this point, the plaintiffs note that the defendants have already
reimbursed them for one half of the funds received by the City for road widening, turn lanes and
other items that were not physically present upon the property. (Doc. 37 at 20). The court finds
that the plaintiffs are, once again, missing the point.
The defendants do not assert, as the plaintiffs seem to infer, that the benefits the plaintiffs
speak of could not possibly fall within the contractual definition of Enhancement Interests.
Instead, the defendants simply argue that the plaintiffs have failed to plead with specificity in
their Amended Complaint how the alleged benefits fall within the definition. While the court
must accept the factual allegations in the complaint as true, “courts ‘are not bound to accept as
true a legal conclusion couched as a factual allegation.’” Speaker, 623 F.3d at 1380 (11th Cir.
2010); Edwards v. Prime, Inc., 602 F.3d 1276, 1291 (11th Cir. 2010); Twombly, 550 U.S. at 555;
see also Iqbal, 556 U.S. at 678-79. Nor, as set out previously, is it proper to assume that the
plaintiff can prove facts it has not alleged or that the defendants have violated the law in ways
that have not been alleged. Twombly, 550 U.S. at 563 n.8.
The plaintiffs’ mere assertion that the listed requisitions are Enhancement Interests does
not, in fact, make them such. Without more than the conclusory allegation that the benefits are
“Enhancement Interests,” the plaintiffs have failed to state a claim for breach of contract
regarding the same. The defendants’ motion to dismiss is due to be granted as to the purported
benefits provided by the City of Tuscaloosa.
In Count II, the plaintiffs aver that “there is a justiciable controversy under the Purchase
Agreement ... due to the GO Zone Bonds and due to certain benefits received ... from the City of
Tuscaloosa.” (Doc. 20 at ¶ 27). Additionally, the plaintiffs aver that they “are entitled to a
declaratory judgment declaring what constitute[s] Enhancement Interests under the Purchase
Agreement and requiring Defendants to pay one-half the value of all said Enhancement Interests
to Plaintiffs, now and in the future.” (Doc. 20 at ¶28). The defendants argue that they cannot
meet this standard. (Doc. 25 at 24).
In order for this court to grant declaratory relief, the plaintiffs would have to “establish
that there was a violation, that there is a serious risk of continuing irreparable injury if the relief
is not granted, and the absence of an adequate remedy at law.” Bolin v. Story, 225 F.3d 1234,
1242 (11th Cir. 2000). Because the court has already found that the plaintiffs have failed to state
a claim for breach of contract based upon the GO Zone Bonds or any alleged benefits provided
by the City of Tuscaloosa, the plaintiffs’ claim for declaratory judgment concerning the same is
due to be dismissed as well. At this juncture, the plaintiffs have not established a violation of the
Purchase Agreement; and, therefore, have not established a legitimate case or controversy. As
such, the defendants’ motion to dismiss is due to be granted as to the plaintiffs’ claim for
declaratory judgment. Additionally, the plaintiffs have not alleged any irreparable injury or the
inadequacy of a legal remedy. Finally, they have offered no factual allegations supporting such a
As part of their breach of contract claim, the plaintiffs aver that “[i]n equity[,] [they] are
entitled to an order requiring Defendants to account to Plaintiffs for all Enhancement Interests
received, or promised, or anticipated,” because the defendants are in sole possession of the
documents that would allow the plaintiffs to know what amount they might be due under the
Purchase Agreement. (Doc. 20 at ¶¶ 23-24). The defendants argue, in part, that this claim must
fail because it is “incidental to other relief.” (Doc. 25 at 26 (quoting Radenhausen v. Doss, 819
So. 2d 616, 619 n.1 (Ala. 2001)).
The plaintiffs offer nothing in support of their conclusory allegation that they are entitled
to an accounting. In essence, the plaintiffs’ claim for an accounting amounts to a hunch that the
defendants may have received Enhancement Interests for which they have not paid the plaintiffs
their share. As such, the plaintiffs have failed to state a claim for an accounting; and the
defendants’ motion to dismiss is due to be granted.
Premised on the foregoing, the defendants’ motions to dismiss (docs. 24, 26, 32) are due
to be granted in full.
DONE, this the 26th day of February, 2015.
JOHN E. OTT
Chief United States Magistrate Judge
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