Renasant Bank v. Park National Corporation et al
Order granting in part denying in part 23 MOTION to Dismiss filed by SE Property Holdings, LLC, Park National Corporation. Defendants' motion for more definite statement is denied. Defendants' motion to strike jury demand is granted in part denied in part. The Plaintiff's motion for leave to amend the complaint (Doc. 29) is granted. Plaintiff is ordered to file its amended complaint by 4/22/2013. Signed by Chief Judge William H. Steele on 4/10/2013. (tgw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
PARK NATIONAL CORPORATION, )
CIVIL ACTION 12-0689-WS-C
This matter is before the Court on the defendants’ motion to dismiss and
embedded motions for more definite statement and to strike jury demand. (Doc.
23). The parties have filed briefs in support of their respective positions, (Docs.
24, 29, 30, 33), and the motion is ripe for resolution. After careful consideration,
the Court concludes that the motion to dismiss is due to be granted in part and
denied in part, that the motion for more definite statement is due to be denied, and
that the motion to strike jury demand is due to be granted in part and denied in
According to the complaint, (Doc. 1), in 2005 non-party Vision Bank
(“Vision”) made a $16 million loan (“the Loan”) to non-party Neverve, LLC
(“Neverve”), secured by certain realty and guarantied by Neverve’s members.
Vision then sold a participation interest in the loan to non-party Crescent Bank and
Trust (“Crescent”) for $5 million, with the parties’ obligations memorialized in a
written agreement (“the Agreement”). The Agreement has been renewed
periodically but without substantial change.
In 2007, Vision became a wholly owned subsidiary of defendant Park
National Corporation (“Park”). In July 2010, Crescent failed and the plaintiff
acquired Crescent’s participation interest and other assets through a purchase and
assumption agreement (“P&A”) with the FDIC. In or after December 2011, Park
sold certain “good” assets of Vision to non-party Centennial Bank. In February
2012, Park merged Vision into defendant SE Property Holdings, LLC (“SEPH”),
another wholly owned subsidiary of Park, and Vision ceased to exist. Among the
“bad” assets retained by Vision and transferred to SEPH was the Loan.
The Loan was long troubled, and it fell into default for non-payment no
later than December 2011. By that time, the value of the collateral had collapsed
along with the Florida real estate market, and the guarantors’ ability to pay had
deteriorated. The Loan matured in June 2012. The Loan remains unpaid and at
least partially unpayable, although SEPH has filed suit against Neverve and the
The complaint includes a litany of wrongdoing by the defendants leading to
this situation and to the plaintiff’s losses on its participation interest. The
complaint then asserts the following causes of action against the designated
• Count One
Breach of contract
• Count Two
• Count Three
• Count Four
• Count Five
• Count Six
• Count Seven
• Count Eight
The defendants seek dismissal under Rules 12(b)(6) and 9(b). They seek a
more definite statement under Rule 12(e), and they seek to strike the jury demand
pursuant to a contractual jury waiver provision.
I. Motion to Dismiss.
Most of the defendants’ arguments target specific counts or portions of
counts. Their only global argument is that the complaint should be dismissed in
its entirety for lack of standing.
To survive dismissal under Rule 12(b)(6), a complaint must first satisfy the
pleading requirements of Rule 8(a)(2). Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555 (2007). “A pleading that states a claim for relief must contain … a short
and plain statement of the claim showing that the pleader is entitled to relief ….”
Fed. R. Civ. P. 8(a)(2). Rule 8 establishes a regime of “notice pleading.”
Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 513-14 (2002). It does not,
however, eliminate all pleading requirements.
First, the complaint must address all the elements that must be shown in
order to support recovery under one or more causes of action. “At a minimum,
notice pleading requires that a complaint contain inferential allegations from
which we can identify each of the material elements necessary to sustain a
recovery under some viable legal theory.” Wilchombe v. TeeVee Toons, Inc., 555
F.3d 949, 960 (11th Cir. 2009) (emphasis and internal quotes omitted).
Pleading elements is necessary, but it is not enough to satisfy Rule 8(a)(2).
The rule “requires more than labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do” to satisfy that rule. Twombly, 550
U.S. at 555. There must in addition be a pleading of facts. Though they need not
be detailed, “[f]actual allegations must be enough to raise a right to relief above
the speculative level ....” Id. That is, the complaint must allege “enough facts to
state a claim for relief that is plausible on its face.” Id. at 570. “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.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard … asks for
more than a sheer possibility that the defendant has acted unlawfully,” and
“[w]here a complaint pleads facts that are merely consistent with a defendant’s
liability, it stops short of the line between possibility and plausibility of
entitlement to relief.” Id. (internal quotes omitted). A complaint lacking
“sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face” will not “survive a motion to dismiss.” Id. But so long as
the plausibility standard is met, the complaint “may proceed even if it strikes a
savvy judge that actual proof of those facts is improbable, and that a recovery is
very remote and unlikely.” Twombly, 550 U.S. at 556 (internal quotes omitted).
The defendants assert that the complaint fails to allege any “cognizable
injury” that is “fairly traceable” to the defendants’ conduct. (Doc. 24 at 8-11).
See generally Georgia Latino Alliance for Human Rights v. Governor of Georgia,
691 F.3d 1250, 1257 (11th Cir. 2012) (reviewing the constitutional elements of
A “cognizable injury” for purposes of standing is “an invasion of a
judicially cognizable interest which is (a) concrete and particularized and (b)
actual or imminent, not conjectural or hypothetical.” Georgia Latino Alliance,
691 F.3d at 1257 (internal quotes omitted). The “fairly traceable” requirement
excludes injury that is “the result of the independent action of some third party not
before the court.” Id. (internal quotes omitted).
As to each count, the complaint alleges damage in three broad forms, each
allegedly resulting from the defendants’ challenged conduct: (1) the plaintiff’s
participation interest was not repurchased; (2) the value of the collateral securing
the Loan deteriorated, and it was sold for taxes; and (3) the potential recovery
from the guarantors was severely limited. (Doc. 1 at 28-38). By virtue of its
participation interest, the plaintiff was exposed to a seven-figure loss on the Loan
should it go in default (as it did).1 The plaintiff’s bulwark against this catastrophe
was the collateral and the guaranties, and its fail-safe was repurchase of its
participation interest. The complaint alleges that the defendants’ conduct removed
all this protection, ensuring that the plaintiff took a bath on the Loan. These
allegations on their face would appear to satisfy the challenged elements of
standing, especially since, “[a]t the pleading stage, general factual allegations of
injury resulting from the defendant’s conduct may suffice to establish standing.”
Resnick v. AvMed, Inc., 693 F.3d 1317, 1323 (11th Cir. 2012) (internal quotes
omitted). The defendants, however, gamely argue otherwise.
As to the failure to repurchase the plaintiff’s participation interest, the
defendants argue that the complaint fails to allege facts that would trigger such a
contractual obligation. (Doc. 24 at 8-9). As the plaintiff notes, this argument does
not go to standing at all, but to the plaintiff’s ability to prove that a breach actually
occurred. But the argument fails for other reasons as well.
The complaint alleges that the Agreement gives the plaintiff the right to
demand repurchase of its participation interest if any default in the Agreement is
not cured within 30 days after notice from the plaintiff specifying the default.
(Doc. 1 at 5-6). The defendants note that the Agreement elsewhere requires that
all notices be given in writing, and they deny that the complaint alleges such
notice. (Doc. 24 at 9). But the complaint alleges that the plaintiff “made formal
demand” for repurchase, “citing multiple breaches of the Participation
Agreement,” and it then clarifies that this formal demand was made by “letter.”
Since the FDIC shares in losses under the Agreement to some unidentified
degree, (Doc. 1, ¶ 62), the plaintiff’s potential loss would be something less than $5
(Doc. 1, ¶¶ 96, 98). A letter would of course satisfy any requirement that notice
The complaint also alleges that the Agreement gives the plaintiff a
repurchase option if “a proceeding is commenced which involves the dissolution,
termination of existence, insolvency, or business failure of” Vision. (Doc. 1 at 6).
The defendants assert without explanation that there was no proceeding and that
the complaint alleges none. (Doc. 24 at 10). The plaintiff responds that
“proceeding” is an undefined term, that the decision to terminate Vision and the
execution of that decision under pressure from the FDIC thus may constitute a
proceeding under the Agreement, and that the complaint alleges the decision and
its execution. (Doc. 29 at 20). In reply, the defendants posit that these allegations
are worthless without an explicit statement that the decision and its execution
constitute a proceeding within the contemplation of the Agreement, (Doc. 30 at 3),
but they offer no support for the remarkable proposition that a pleading must not
only state the facts but explain their import as well. The defendants also propose
that “proceeding” be confined to a formal setting, (id. at 3 n.1), but their six-line
argument is far too skeletal to carry the day, especially as it was withheld until
their reply brief.
As to the deterioration and loss of the collateral, the defendants – again in a
single sentence unencumbered by analysis or authority – fault the complaint for
not explaining how their alleged conduct prevented the plaintiff from taking action
to protect the collateral and for not alleging that the plaintiff had a right to take
protective action. (Doc. 24 at 10). But the complaint expressly alleges that the
plaintiff asked for confirmation that property taxes on the collateral had been paid,
that it was falsely told they had been, and that the property was then sold for taxes.
(Doc. 1, ¶¶ 73, 79, 88, 94, 95). The complaint also expressly alleges that the
defendants misrepresented the tax situation and that the plaintiff, in reliance on
these misrepresentations, refrained from taking steps to protect itself with regard
to the collateral – obviously, by having the taxes paid or the consequences of non6
payment delayed. (Id., ¶¶ 131, 133).2 The defendants’ alleged conduct thus
prevented the plaintiff from taking this protective action by hiding from the
plaintiff the need for such action.
The defendants offer no authority for the proposition that a complaint must
expressly allege the plaintiff’s right to take action. On the contrary, they admit
that the complaint need only provide factual material sufficient to make plausible
the plaintiff’s assertion of the defendants’ liability. (Doc. 24 at 5-6). The
allegation that the plaintiff carried a $5 million participation interest in the loan,
with all its attendant risks, renders it far more than plausible that the plaintiff had a
right to protect its investment by taking steps to protect the collateral. Had the
defendants pointed out some legal or contractual impediment to the plaintiff taking
such action, they might have canceled the facial plausibility of the plaintiff’s right,
but they have not done so.
As to the limited potential recovery from the guarantors, the defendants
argue that the complaint identifies only a future, conjectural injury. (Doc. 24 at
10). The complaint alleges that, in reliance on the defendants’ assurances, the
plaintiff took no action before a guarantor sold assets that could have been
available to satisfy his guaranty, “thereby decreasing the likelihood of repayment
of the participation interest” and rendering “the potential recovery from the
Guarantors … severely limited.” (Doc. 1, ¶ 135). The defendants seize on the
words “likelihood” and “potential,” read in isolation, as demonstrating that only a
future, conjectural injury has been alleged. By doing so, they miss the meaning of
the allegations and fail to appreciate that the plaintiff’s loss has already occurred.
The Loan is in default, the collateral has been sold for taxes, and the defendants
refuse to repurchase the plaintiff’s participation interest. Under such
circumstances, the plaintiff’s only hope of recovery – to which it is now entitled –
By way of example only, the plaintiff could have pressured Neverve, the
guarantors and/or the defendants to pay the taxes, or it could have paid the taxes itself.
Or, the plaintiff could have sought additional time from the relevant taxing authorities.
is from the guarantors. The complaint, however, alleges that the debt exceeds the
guarantors’ ability to pay, that is, that the potential recovery from them is – today
– “severely limited.” The guarantors’ obligation to pay the full debt exists in the
present, as does their inability to do so. That is a present injury by any definition.
The only thing that lies in the future, that remains “potential,” is the guarantors’
actual payment of what little they can.
For the reasons set forth above, the defendants are not entitled to dismissal
for want of constitutional standing.
B. Breach of Contract.
The defendants argue that Park should be dismissed as a defendant because
it is not a party to the Agreement. They also argue that portions of the claim
should be dismissed because they depend on the breach of obligations the
Agreement does not impose. (Doc. 24 at 11-14).
1. Park as a defendant.
The Agreement was signed by Vision and Crescent. The plaintiff
succeeded to Crescent’s interests under the Agreement by P&A. (Doc. 1, ¶ 62).
Vision, after selling off certain assets, was merged into SEPH, which became
Vision’s successor. (Id., ¶¶ 49, 52). While it existed, Vision was a wholly owned
subsidiary of Park. (Id., ¶ 26). SEPH likewise was a wholly owned subsidiary of
Park. (Id., ¶ 50).
There is no written agreement between Park and either Crescent or the
plaintiff. Moreover, the plaintiff agrees that Park cannot be bound by the
Agreement simply because it owned Vision and now owns SEPH. (Doc. 29 at
23). The complaint, however, alleges two bases for Park’s contractual liability
under the Agreement: (1) Park is the successor of Vision; and (2) Park undertook
the duty to fulfill Vision’s contractual obligations. (Doc. 1, ¶¶ 109-10).3 The
plaintiff insists it has met its burden of pleading facts rendering these theories
plausible, (Doc. 29 at 22-24), but the Court cannot agree.
The plaintiff’s first theory is fatally contradicted by the complaint itself,
which alleges that SEPH – not Park – is the successor of Vision. (Doc. 1, ¶ 52).
The second theory depends on a letter from Park notifying the plaintiff of the
transfer of the Agreement from Vision. (Doc. 29 at 24). The plaintiff argues that
Park therein “represented it would be bound by” the Agreement, (id.), but the
document in fact states that “SE Property [not Park] would succeed by operation
of law to the rights and obligations of Vision under the Participation Agreement.”
(Doc. 1, Exhibit H). As to Park’s own status, the letter states only that SEPH is “a
wholly-owned subsidiary of Park,” (id.), and, as noted, the plaintiff concedes that
such a status is legally inadequate to saddle the parent with liability on its
For the reasons set forth above, Park is entitled to dismissal of the
plaintiff’s claim against it for breach of contract.
2. Absence of contractual obligation.
The complaint identifies nine ways that SEPH and Vision, its predecessor,
breached the Agreement. (Doc. 1, ¶ 112). The defendants argue that Count One
should be dismissed to the extent it depends on four of these. (Doc. 24 at 12-14).
The complaint alleges breach by: (1) failure to apprise the plaintiff and/or
Crescent of additional loans made to the guarantors; (2) failure to obtain the
The plaintiff in brief lists other theories under which a non-party can be bound
by a contract, (Doc. 29 at 23 n.7), but they are irrelevant since neither the complaint nor
the plaintiff’s brief invokes any of them.
The plaintiff asserts vaguely that “other facts alleged about Park’s direct
involvement with Vision and its loans” render it plausible that Park undertook the duty of
fulfilling Vision’s obligations under the Agreement. (Doc. 29 at 24). The plaintiff
identifies, and the Court detects, no allegations that could render plausible the allegation
that Park became bound by the Agreement for purposes of a claim for breach of contract.
plaintiff’s consent to the merger of Vision into SEPH; and (3) failure to obtain the
plaintiff’s consent to terminating Vision’s existence. (Doc. 1, ¶ 112.a - c). The
defendants assert, and the Court agrees, that the Agreement imposes no such
obligations. The plaintiff offers no rebuttal, noting only that its claim survives as
to those breaches the defendants have not challenged. (Doc. 29 at 24-25).
Count One also alleges breach by failure to repurchase the plaintiff’s
participation interest. (Doc. 1, ¶ 112i). The defendants repeat their argument that
the complaint alleges no written notice of default or commencement of a
proceeding to terminate Vision’s existence. (Doc. 24 at 14). This argument fails
for reasons stated in Part I.A.
For the reasons set forth above, the defendants are entitled to dismissal as to
the breaches alleged in paragraph 112.a - c but not as to the breach alleged in
C. Tort Claims.
The defendants raise several arguments as to some or all of the complaint’s
tort claims, which the Court considers in turn.
Counts Two and Three are based only on Park’s conduct vis-à-vis the
plaintiff. (Doc. 1 at 28-31). Counts Four through Seven, however, allege
misconduct directed at both the plaintiff and Crescent. (Id. at 31-38).5 The
defendants assert that these counts must be dismissed because the complaint fails
to allege the plaintiff’s standing to assert Crescent’s tort claims. (Doc. 24 at 1415). Unlike the argument addressed in Part I.A, this standing argument implicates
The defendants say this is also true of Count Eight, but the only wrongdoing
alleged therein is that Park “intentionally interfered with the contract between Vision and
Renasant … by terminating Vision’s existence and merging Vision into SE Property
without Renasant’s consent.” (Doc. 1, ¶¶ 154-55). This misconduct could not possibly
implicate Crescent, which had failed 19 months before the merger of Vision into SEPH.
not a constitutional requirement of standing but a prudential one – that the plaintiff
generally should assert its own rights and not those of others. E.g., KH Outdoor,
LLC v. City of Trussville, 458 F.3d 1261, 1266 (11th Cir. 2006).
On its face, the defendants’ argument stretches too far, since it seeks
dismissal of the counts in their entirety, even though each of them alleges that the
defendants’ misconduct was also directed at the plaintiff, whose prudential
standing is unquestionable. But the defendants’ argument fails as to Crescent as
The defendants urge that the complaint fails to allege the plaintiff’s
acquisition of the right to pursue Crescent’s tort claims. But the complaint alleges
that the plaintiff acquired Crescent’s assets by P&A after Crescent failed, (Doc. 1,
¶ 62), and nothing in that allegation limits the plaintiff’s acquired assets to
contracts and contract claims as opposed to tort claims.6
The defendants next suggest that any allegation that the plaintiff acquired
Crescent’s tort claims is implausible under Twombly and Iqbal. But merely citing
a case for the proposition that (under New York law) an assignment of contract
claims does not “automatically” carry with it an assignment of tort claims, (Doc.
24 at 14), does nothing to render it implausible that the FDIC as receiver would
transfer the tort claims of a failed bank to an assuming institution such as the
plaintiff. The complaint’s allegation of a transfer of assets pursuant to a P&A
renders it plausible that Crescent’s tort claims were included in the transfer.
In their reply brief, the defendants attempt to counter this plausibility by
addressing the terms of the P&A itself.7 They admit that the P&A actually
provides for the general transfer of Crescent’s tort claims to the plaintiff but note
The defendants incorrectly read the complaint as alleging that the plaintiff
acquired only Crescent’s rights under the Agreement, but the very paragraph to which
they cite specifically alleges that the plaintiff received other assets as well.
The P&A is not appended to the complaint, but the plaintiff cited to the online
version in its opposition brief. (Doc. 29 at 22 n.6).
that it excludes “certain tort claims” from the transfer. (Doc. 30 at 8). The
defendants make no argument that the tort claims brought by the plaintiff are
among the “certain tort claims” excluded from transfer; instead, they assert that
the complaint should have specifically alleged that the asserted tort claims were
not excluded from transfer. The defendants cite no authority for the proposition
that a complaint must not only allege facts rendering plausible its claim for relief
but must also expressly negative all contrary possibilities. Nor do they explain
why the Court should address an argument they could have raised initially8 but
withheld until their reply brief.9
Similarly, the defendants point to language in the P&A that requires the
plaintiff to obtain the FDIC’s consent before instituting suit in certain situations,
and they object that the complaint fails to allege compliance with this provision.
(Doc. 30 at 8). This argument has nothing at all to do with the plaintiff’s standing
to raise Crescent’s tort claims. It therefore represents a wholly new argument
raised for the first time on reply. For reasons already explained, the Court declines
to consider this tardy argument.
For the reasons set forth above, the defendants are not entitled to dismissal
of any count for want of prudential standing.
2. Economic loss rule.
“The ‘economic loss rule’ generally provides that a contracting party who
suffers purely economic losses must seek his remedy in contract and not in tort.”
General Electric Co. v. Lowe’s Home Centers, Inc., 608 S.E.2d 636, 637 (Ga.
2005). The defendants argue that this rule bars the plaintiffs’ tort claims against
SEPH. (Doc. 24 at 15-18).
The P&A is freely available on the FDIC’s website.
“District courts, including this one, ordinarily do not consider arguments raised
for the first time on reply.” Gross-Jones v. Mercy Medical, 874 F. Supp. 2d 1319, 1330
n.8 (S.D. Ala. 2012) (citing cases and explaining rationale).
The threshold question is whether, as the defendants argue, Georgia
substantive law governs the plaintiff’s tort claims.10 “In diversity cases, the
choice-of-law rules of the forum state determine what law governs ….” Interface
Kanner, LLC v. JPMorgan Chase Bank, N.A., 704 F.3d 927, 932 (11th Cir. 2013).
“It is well settled that the traditional conflict rule of lex loci delicti applies to tort
actions brought in this jurisdiction.” Norris v. Taylor, 460 So. 2d 151, 152 (Ala.
1984). “Under this principle, an Alabama court will determine the substantive
rights of an injured party according to the law of the state where the injury
occurred.” Id.; accord Fitts v. Minnesota Mining & Manufacturing Co., 581 So.
2d 819, 820, 823 (Ala. 1991) (declining to abandon the rule of lex loci delicti).
The plaintiff’s claimed losses are entirely financial. “Courts in Alabama
faced with financial injury claims have consistently held, under the doctrine of lex
loci delicti, that the law of the state where a plaintiff suffered its alleged financial
injury arising from the common law tort claim is the law that governs those
claims.” Alabama Aircraft Industries, Inc. v. Boeing Co., 2013 WL 1178720 at *8
(N.D. Ala. 2013); accord Chambers v. Cooney, 2007 WL 2493682 at *11 (S.D.
Ala. 2007). Because its headquarters and all of its branches were located in
Georgia,11 Crescent could have suffered injury only in that state. Thus, to the
extent the plaintiff’s tort claims are based on injury suffered by Crescent, they are
governed by Georgia law.12
The Agreement contains an Alabama choice-of-law provision, but the
defendants argue persuasively that the provision applies only to contract claims, not tort
claims. (Doc. 24 at 7). The plaintiff offers no disagreement with the defendants’
Office of Inspector General, FDIC, Report No. MLR-11-011 at 1 (January
2011), fdicoig.gov/reports11%5C11-011.pdf. A court may make factual findings
antecedent to resolving a choice-of-law issue. Grupo Televisa, S.A. v. Telemundo
Communications Group, Inc., 485 F.3d 1233, 1239 (11th Cir. 2007).
There has been no assertion or showing that the plaintiff’s own injury was also
experienced in Georgia.
The plaintiff objects without amplification that the defendants “did not
attempt to explain why Alabama choice of law rules support characterizing the
issue as one of tort rather than one of contract.” (Doc. 29 at 27). But it is the
plaintiff that has failed to explain how claims for fraud, suppression, negligence
and wantonness could be construed as contract claims for choice-of-law purposes.
See, e.g., Lifestar Response, Inc. v. Admiral Insurance Co., 17 So. 3d 200, 213
(Ala. 2009) (claims of negligence and wantonness are governed by lex loci
delicti); Williams v. Norwest Financial Alabama, Inc., 723 So. 2d 97, 99, 101
(Ala. Civ. App. 1998) (claims of fraudulent misrepresentation, fraudulent
suppression, negligence and wantonness are governed by lex loci delicti).
The plaintiff also notes in passing that “the location of the injury is not the
only consideration taken into account” in determining the governing substantive
law for a tort claim. (Doc. 29 at 27 n.9). But the plaintiff identifies no other
considerations of which the Court should take note. In the single authority cited
by the plaintiff, the only other consideration recognized is the forum state’s public
policy, which may contradict the foreign jurisdiction’s substantive law with
sufficient force to justify refusing to apply that law. San Francisco Residence
Club, Inc. v. Baswell-Guthrie, ___ F. Supp. ___, 2012 WL 4339316 at *31 (N.D.
Ala. 2012). The plaintiff has identified no Alabama public policy that could
justify ignoring Georgia’s economic loss rule.
Remaining for consideration is the scope of the economic loss rule as
applied to the plaintiff’s tort claims. As noted, the rule protects only one in a
contractual relationship with the plaintiff. Since Park was not in a contractual
relationship with Crescent, it cannot benefit from the economic loss rule. The
defendants do not argue otherwise.13
“The economic loss rule is inapplicable in the presence of passive
concealment or fraud.” Holloman v. D.R. Horton, Inc., 524 S.E.2d 790, 797 (Ga.
The defendants expressly limit application of the rule to Counts Four through
Seven as asserted “against SEPH.” (Doc. 24 at 15).
App. 1999). This exception would appear to render problematic application of the
rule to Counts Four and Five. The defendants do not cite Holloman or any other
Georgia case addressing the application of the rule to fraud claims. Instead, they
cite two Florida cases and announce that “Georgia and Florida have identical
economic loss rules.” (Doc. 24 at 15-16 & 16 n.7). The case they quote for this
proposition did not in fact embrace it; instead, the Court in Foxworthy, Inc. v.
CMG Life Services, Inc., 2012 WL 1269127 (N.D. Ga. 2012), stated only that
“[t]he parties concede that Georgia and Florida’s economic loss rule is identical.”
Id. at *2 n.2 (emphasis added). The Court is unswayed by the unexplained
opinions of litigants in other actions. Without addressing Georgia’s
“misrepresentation exception” to the economic loss rule, Holloman, 524 S.E.2d at
796, the defendants cannot obtain partial dismissal of Counts Four and Five under
The economic loss rule does not apply when the law imposes a duty
independent of any duty owing under the contract. Thus, a claim for negligent
construction is not barred by the rule, since “[t]his cause of action arises in tort and
exists independently of any claim for breach of contract.” Rowe v. Akin &
Flanders, Inc., 525 S.E. 2d 123, 126 (Ga. App. 1999) (internal quotes omitted).
The only case cited by the defendants that applies the economic loss rule to a
negligence claim recognizes precisely this distinction. Rosen v. Protective Life
Insurance Co., 20120 WL 2014657 at *9 (N.D. Ga. 2010). The defendants,
however, have failed to demonstrate that the duties alleged by the plaintiff spring
exclusively from the Agreement and not (or not also) from “a duty owed to
plaintiff independent of [the] contract to avoid harming him.” Id. (internal quotes
omitted).14 Without doing so, they cannot obtain dismissal of any claim or portion
of any claim under the economic loss rule.
The defendants state only that the alleged tort duties to exercise reasonable care
and to act in a commercially manner are “interwoven with” the parties’ rights and
obligations under the Agreement. (Doc. 24 at 17). This may be a necessary condition to
For the reasons set forth above, the defendants are not entitled to dismissal
of any portion of Counts Four through Seven based on Georgia’s economic loss
The defendants argue that Counts Two through Five should be dismissed
for failure to plead fraud with the particularity demanded by Rule 9(b). (Doc. 24
Rule 9(b) is satisfied if the complaint sets forth (1) precisely what
statements were made in what documents or oral representations or
what omissions were made, and (2) the time and place of each such
statement and the person responsible for making (or, in the case of
omissions, not making) same, and (3) the content of such statements
and the manner in which they misled the plaintiff, and (4) what the
defendants obtained as a consequence of the fraud.
Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1237 (11th Cir. 2008) (internal
quotes omitted). The defendants invoke this standard. (Doc. 24 at 6).
i. Count Two.
Count Two alleges that Park defrauded the plaintiff when, on or about
December 29, 2011, its agents intentionally misrepresented that Park was able to
honor Vision’s obligations under the Agreement and that Park would do so. (Doc.
1, ¶ 115). The defendants complain that Count Two does not identify what
individual made this misrepresentation, what precisely was communicated, or
application of the economic loss rule, but it is not a sufficient one, since “[i]t is axiomatic
that a single act or course of conduct may constitute not only a breach of contract but an
independent tort as well, if in addition to violating a contract obligation it also violates a
duty owed to plaintiff independent of [the] contract to avoid harming him.” Rosen, 2010
WL 2014657 at *9 (internal quotes omitted). The question is not whether the alleged
duties are similar to contractual duties but whether the law imposes such duties regardless
of whether the contract does so. The defendants have not addressed this critical question.
“In alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
through what medium the message was sent. (Doc. 24 at 21). The factual
allegations of the complaint, however, explicitly credit Brett Baumeister with the
misrepresentation, identify the medium as a December 29 e-mail to Clark
Blackwell, and quote the document. (Doc. 1, ¶¶ 83-85). No greater particularity
Count Two alleges that Baumeister’s representation was false because Park
had no intention of honoring Vision’s obligations. (Doc. 1, ¶ 116). The
defendants object that the complaint does not include specific facts demonstrating
the representation’s falsity, (Doc. 24 at 21), but they have failed to offer any
authority for the proposition that Rule 9(b) requires particularity in this respect or
that the allegation concerning Park’s intentions would not satisfy any such
Finally, the defendants complain that Count Two fails to allege with
particularity that Baumeister or the other individuals listed in Count Two knew the
representation was false or that they intended not to honor the Agreement. (Doc.
24 at 21-22).16 The defendants, however, have not shown that Rule 9(b) requires
particularity in the pleading of such matters. On the contrary, that rule explicitly
provides that “intent, knowledge, and other conditions of a person’s mind may be
alleged generally.” The defendants’ own authority makes the same point, in the
sentence immediately preceding that quoted by the defendants. Mizzaro, 544 F.3d
For the reasons set forth above, the defendants are not entitled to dismissal
of Count Two based on a failure to comply with Rule 9(b).
ii. Count Three.
Count Two alleges these matters generally. (Doc. 1, ¶¶ 115-17).
The defendants cast all on an unpublished, unreasoned decision of the Tenth
Circuit. (Doc. 24 at 20). That case appears irreconcilable with Rule 9(b) and Eleventh
Circuit precedent; certainly the defendants have not attempted a reconciliation.
Like many suppression claims, Count Three is the flip side of the
misrepresentation claim found in Count Two. Specifically, Count Three alleges
that Park was under a duty to disclose that it would not ensure that the obligations
under the Agreement were honored but that it wrongfully concealed this fact from
the plaintiff. (Doc. 1, ¶¶ 122-24). The defendants argue that Count Three does
not identify what individuals were responsible for this concealment, what exactly
they concealed, and when they concealed it. (Doc. 24 at 22). The complaint,
however, explicitly states what was concealed. (Doc. 1, ¶¶ 123-24). Moreover,
the complaint specifically identifies the four individuals responsible for
Baumeister’s misrepresentation and the date on which it occurred. (Id., ¶ 115).
Since Count Three is the flip side of Count Two, and since Count Two’s
allegations are incorporated into Count Three, (id., ¶ 121), Count Three clearly
alleges that these four individuals concealed the facts on or about December 29,
The defendants next repeat their argument that the plaintiff is required to
plead knowledge and intent with particularity, (Doc. 24 at 22), an effort that fails
for reasons previously stated.
Finally, the defendants argue that Count Three fails to provide any factual
basis for its allegation that Park owed the plaintiff a duty of disclosure. (Doc. 24
at 22-23). Assuming without deciding that Rule 9(b) requires such detail, Count
Three alleges that Park’s duty to disclose derives from its superior knowledge of
the facts, the duties imposed by the Agreement, its degree of supervision over
Vision and SEPH, and the duties it voluntarily assumed with respect to providing
It is possible to read Mizzaro and like cases as not requiring a plaintiff to plead
the time of an omission. See 544 F.3d at 1237 (Rule 9(b) is satisfied if the plaintiff
alleges “the time and place of each such statement and the person responsible for making
(or, in the case of omissions, not making) same”) (emphasis added). Because the
complaint does identify a time of this omission, the Court need not resolve the issue.
And because the defendants have not established that the plaintiff must identify a specific
time of an omission, the Court does not decide whether the plaintiff can rely on an
ongoing concealment despite its failure to plead specific inclusive dates.
such information. (Doc. 1, ¶ 122). Assuming without deciding that this listing
would not satisfy any particularity requirement under Rule 9(b), the complaint
provides volumes of information concerning Park’s superior knowledge of its own
intentions, its elaborate supervision (real or at least postured) of Vision and SEPH,
and its voluntary act of providing information about its intentions to the plaintiff.
(E.g., id., ¶¶ 21-25, 32-33, 35, 40, 46, 51, 78-86).19
For the reasons set forth above, the defendants are not entitled to dismissal
of Count Three based on a failure to comply with Rule 9(b).
iii. Counts Four and Five.
Count Four, like Count Two, is a fraud claim. Unlike Count Two, Count
Four names both Park and SEPH as defendants. Also unlike Count Two, Count
Four alleges that misrepresentations were made to Crescent as well as to the
plaintiff. (Doc. 1, ¶¶ 130-33).
Count Four first alleges that Lyndsay Job, “[i]n 2009, 2010 and 2011,”
made certain misrepresentations to Crescent and/or the plaintiff. (Doc. 1, ¶ 130).
The Court agrees with the defendants that neither Count Four nor the antecedent
allegations of the complaint provide the slightest detail concerning when Job made
these representations or by what medium.20 And although Job is alleged generally
to have misrepresented the financial condition and indebtedness of the borrower
and guarantors, “precisely what statements were made” is left unstated. This
portion of Count Four grossly violates Rule 9(b).
Count Four next alleges that, in early 2012, Baumeister and Frank Wagner
misrepresented by “correspondence” the financial condition and indebtedness of
In view of these allegations, it cannot be relevant that the complaint “does not
cite any section of the Agreement that purportedly imposes a duty to disclose” on Park.
(Doc. 24 at 23).
The only communication by Job alleged in the complaint is a July 2010 letter
that contains none of the alleged misrepresentations. (Doc. 1, ¶ 59; id., Exhibit G).
the borrower and guarantors. (Doc. 1, ¶ 131). The only correspondence from
Baumeister alleged in the complaint, however, occurred in 2011, and the only
correspondence from Wagner addressed only the status of property taxes on the
collateral. (Id., ¶¶ 83, 92-94). These allegations display all the infirmities
recounted in the preceding paragraph, and this portion of Count Four equally
violates Rule 9(b).
Finally, Count Four alleges that, in early 2012, Wagner misrepresented that
property taxes on the collateral were not past due. (Doc. 1, ¶ 131). The
defendants raise the same arguments, but as to this allegation they fail, because the
complaint elsewhere alleges that, by e-mail to the plaintiff dated March 27, 2012,
Wagner falsely represented that the property taxes were current. (Id., ¶¶ 92-94).21
Count Five is the suppression counterpart to Count Four. (Doc. 1, ¶¶ 13742). Because it is no more carefully drawn than the fraud claim, Count Five
violates Rule 9(b) the same extent.
For the reasons set forth above, the defendants are entitled to dismissal of
Counts Four and Five based on a failure to comply with Rule 9(b), except those
The defendants profess confusion as to whether this portion of Count Four is
asserted against both of them and whether it implicates communications with Crescent.
(Doc. 24 at 24). Since Wagner is alleged to be Park’s agent and commercial lender,
(Doc. 1, ¶¶ 51, 87, 115), this portion of Count Four is necessarily limited to Park. And
since the communication occurred in 2012, almost two years after the plaintiff acquired
Crescent’s assets, (id., ¶¶ 60-62), it is necessarily limited to communication with the
To the uncertain extent the defendants argue for dismissal because the individual
recipient of the e-mail is not named, they have not shown that Mizzaro requires such
precision. See 544 F.3d at 1237 (requiring identification of “the person responsible for
making (or, in the case of omissions, not making) same,” but not mentioning
identification of the recipient). Even if such an allegation is required, they have not
shown that a complaint lacking in only this detail – which a review of their own e-mail
records would supply – is subject to dismissal.
portions of Counts Four and Five asserting fraud and suppression regarding the
status of property taxes on the collateral.22
4. Intentional interference.
Count Eight alleges that Park intentionally interfered with the plaintiff’s
contractual relations with Vision. (Doc. 1 at 37-38). The defendants argue that
Park, as Vision’s parent, is legally incapable of committing such a tort. (Doc. 24
at 25-26). For this proposition, they rely exclusively on Georgia law. As
discussed in Part I.C.2, however, the substantive law governing the plaintiff’s tort
claims is the law of the place where the injury occurred. Injury to Crescent
occurred in Georgia, but Count Eight is based on injury experienced directly by
the plaintiff when Park terminated Vision’s existence without the plaintiff’s
consent in 2012, long after Crescent ceased to exist. Because the defendants have
offered nothing to show that this injury to the plaintiff occurred in Georgia, their
authorities are irrelevant.
In their reply brief, the defendants switch to Alabama and Mississippi
authorities. (Doc. 30 at 13-14). As it has stated before, the Court will not
entertain new arguments first raised on reply. Even were the Court inclined to do
so, the defendants have not established that Alabama or Mississippi furnishes the
substantive law governing the plaintiff’s tort claims to the extent they are based on
injuries experienced directly by the plaintiff.
For the reasons set forth above, the defendants are not entitled to dismissal
of Count Eight.
The Court does not warrant that it has identified all the Rule 9(b) deficiencies in
these counts, but those that are identified are sufficient to require dismissal.
II. Motion for More Definite Statement.
Calling the plaintiff’s pleading a “shotgun complaint,” the defendants
request that the plaintiff be required to replead under Rule 12(e). (Doc. 24 at 2627).
“The typical shotgun complaint contains several counts, each one
incorporating by reference the allegations of its predecessors, leading to a situation
where most of the counts (i.e., all but the first) contain irrelevant factual
allegations and legal conclusions.” Strategic Income Fund, L.L.C. v. Spear, Leeds
& Kellogg Corp., 305 F.3d 1293, 1295 (11th Cir. 2002). The instant complaint
employs incorporation by reference and hence meets this technical definition of a
But Rule 12(e) does not authorize repleader simply because its counts
incorporate earlier paragraphs; instead, the pleading must be “so vague or
ambiguous that the party cannot reasonably prepare a response.” Fed. R. Civ. P.
12(e). Certainly that standard may sometimes be met by a shotgun complaint, but
the defendants have not shown it to be satisfied in this case; indeed, they have not
attempted to do so. Instead, they advance the erroneous position that the mere
usage of incorporation of itself requires repleader. (Doc. 24 at 27). This is
incorrect, and the Court’s familiarity with the complaint permits it to comfortably
draw the conclusion that its use of incorporation by reference does not impair the
defendants’ ability to frame a responsive pleading for purposes of Rule 12(e).23
The defendants also object that the complaint “has improperly combined
the parties and non-party entities into single subjects and objects,” making it
“difficult … to understand” which defendant allegedly did what and whether they
did it to the plaintiff or to Crescent. (Doc. 24 at 27). As noted, Crescent’s failure
As the defendants’ own authority states, relief under Rule 12(e) is available to
address a shotgun pleading when “it is virtually impossible to know which allegations of
fact are intended to support which claim(s) for relief.” Anderson v. District Board of
Trustees, 77 F.3d 364, 366 (11th Cir. 1996). That standard is not remotely approached by
the complaint in this action.
and the plaintiff’s purchase of its assets both occurred on July 23, 2010. (Doc. 1,
¶¶ 60-62). Thus, any conduct occurring before that date necessarily was directed
at Crescent, and any conduct occurring after that date necessarily was directed at
the plaintiff; there is no confusion on this score. And it can hardly be confusing
for the complaint to allege that Park engaged in certain conduct, that SEPH
engaged in certain conduct, and that both defendants engaged in certain conduct.
Notably, the defendants identify not a single example of an allegation so vague or
ambiguous that they cannot respond to it.
For the reasons set forth above, the defendants’ motion for more definite
statement is due to be denied.
III. Motion to Strike Jury Demand.
The Agreement provides that “Participating Bank waives, to the fullest
extent permitted by law, any right to trial by jury on any issues or claims arising
under this Agreement.” (Doc. 23, Exhibit 1, § 20). Alabama law governs the
construction of this clause. (Id.). The defendants argue that the provision requires
that the plaintiff’s jury demand be stricken “in its entirety.” (Doc. 24 at 28-30).
As resolved in Part I.B.1, Park is not a party to the Agreement. The
defendants have offered no explanation how Park, as a stranger to the contract,
may nevertheless take advantage of its jury waiver.
As the defendants acknowledge, (Doc. 24 at 28-29), the phrase “arising
under” in a jury waiver provision “exclude[s] claims that d[o] not require a
reference to, or a construction of, the underlying contract.” Ex parte Cupps, 782
So. 2d 772, 776 (Ala. 2000). But it may exclude even more. See id. (to be
covered by such a provision, the claim “must at the very least” require reference to
or construction of the contract) (internal quotes omitted). The defendants assume
that the plaintiff’s tort claims require such reference to or construction of the
Agreement, but they offer no analysis of the complaint or its claims to support this
proposition, and the Court will not embark on such a journey on its own.24 Nor do
the defendants acknowledge, much less negate, the possible existence of additional
requirements for waiver as implied by Ex parte Cupps.
A claim for breach of contract does fall within the scope of an “arising
under” jury waiver. Ex parte Cupps, 782 So. 2d at 777. Thus, the defendants’
motion is due to be granted with respect to the plaintiff’s claim for breach of
contract against SEPH. In all other respects, the motion is due to be denied.
IV. Motion for Leave to Amend.
The plaintiff seeks leave to amend the complaint to revive the dismissed
portions of Counts Four and Five, (Doc. 29 at 30), which the Court construes as a
motion for such relief.25 Leave to amend at this stage of the proceedings is to be
granted “when justice so requires.” Fed. R. Civ. P. 15(a)(2). Leave to amend
should be given under this rule “[i]n the absence of any apparent or declared
reason – such as undue delay, bad faith or dilatory motive on the part of the
movant, repeated failure to cure deficiencies by amendments previously allowed,
undue prejudice to the opposing party by virtue of allowance of the amendment,
futility of amendment, etc.” Garfield v. NDC Health Corp., 466 F.3d 1255, 1270
(11th Cir. 2006) (internal quotes omitted). The burden is on the defendants to
establish one or more of these exceptions to the bias favoring amendment.26 The
The defendants simply list without discussion three paragraphs of the
complaint, none of which obviously satisfy Ex parte Cupps.
See generally Fed. R. Civ. P. 7(b)(1) (“A request for a court order must be
made by motion.”).
Spanish Broadcasting System, Inc. v. Clear Channel Communications, Inc., 376
F.3d 1065, 1077 (11th Cir. 2004) (“The Supreme Court has emphasized that leave to
amend must be granted absent a specific, significant reason for denial ....”); accord Best
Canvas Products & Supplies, Inc. v. Ploof Truck Lines, Inc., 713 F.2d 618, 623 (11th Cir.
defendants, however, raise no objection to the plaintiff’s motion. Accordingly, the
Court concludes that the motion is due to be granted.27
For the reasons set forth above, the defendants’ motion to dismiss is due to
be granted with respect to Count One to the extent that claim is asserted against
Park; granted with respect to Count One to the extent based on the matters
asserted in paragraph 112.a - c; and granted with respect to Counts Four and Five,
except to the extent those claims allege misrepresentation or suppression
concerning property taxes on the collateral. In all other respects, the defendants’
motion to dismiss is denied.
For the reasons set forth above, the defendants’ motion for more definite
statement is denied.
For the reasons set forth above, the defendants’ motion to strike jury
demand is granted with respect to Count One and is in all other respects denied.
For the reasons set forth above, the plaintiff’s motion for leave to amend is
granted. The plaintiff is ordered to file and serve its amended complaint on or
before April 22, 2013.
DONE and ORDERED this 10th day of April, 2013.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE
See also Summer v. Land & Leisure, Inc., 664 F.2d 965, 971 (former 5th Cir.
1981) (“[D]ismissal for failure to comply with Rule 9(b) is almost always with leave to
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