Gorsuch, Ltd. v. Wells Fargo National Bank Association
Filing
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ORDER. Defendant's 14 Motion to Dismiss Plaintiffs' Second Claim for Relief as Amended Pursuant to Fed. R. Civ. P. 12(b)(6) is granted. Plaintiffs Gorsuch Ltd., B.C.; Gorsuch, Limited at Aspen; Gorsuch, Limited at Keystone Mountain; and Gorsuch Cooper, LLC are dismissed from this case. Plaintiff's 22 Motion to Stay Arbitration Proceeding Between Gorsuch, Ltd. and Wells Fargo National Bank Association,, the 28 Third Party Beneficiary Plaintiffs' Motion for Partial Summa ry Judgment Re: Breach of Contract, and 30 plaintiff's motion for leave to file a surreply are denied as moot. Defendant's 15 Motion to Compel Arbitration as to Amended Claims Asserted by Plaintiff Gorsuch, Ltd. and to Stay Further Proc eedings as to Such Claims is granted. This case is stayed and the parties shall proceed with the arbitration agreement. This case shall be administratively closed, pursuant to D.C.COLO.LCivR 41.2. If no action is taken to reopen this case before 12/1/2012, the case will be dismissed without prejudice without any further notice to either party. By Judge Philip A. Brimmer on 11/17/11.(mnfsl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 11-cv-00970-PAB-MEH
GORSUCH, LTD., a Colorado corporation,
GORSUCH LTD., B.C., a Colorado corporation,
GORSUCH, LIMITED AT ASPEN, a Colorado corporation,
GORSUCH, LIMITED AT KEYSTONE MOUNTAIN, a Colorado corporation, and
GORSUCH COOPER, LLC, a Colorado limited liability company,
Plaintiffs,
v.
WELLS FARGO NATIONAL BANK ASSOCIATION,
Defendant.
ORDER
This matter is before the Court on the Motion to Dismiss Plaintiffs’ Second Claim
for Relief as Amended Pursuant to Fed. R. Civ. P. 12(b)(6) [Docket No. 14] and the
Motion to Compel Arbitration as to Amended Claims Asserted by Plaintiff Gorsuch, Ltd.
and to Stay Further Proceedings as to Such Claims [Docket No. 15] filed by defendant
Wells Fargo National Bank Association (“Wells Fargo”). The Court exercises
jurisdiction over this case based on diversity of citizenship pursuant to 28 U.S.C. §
1332(a). The motions are fully briefed and ripe for disposition.
I. BACKGROUND
The following facts are drawn from plaintiffs’ complaint [Docket No. 9], see
Alvarado v. KOB-TV, L.L.C., 493 F.3d 1210, 1215 (10th Cir. 2007) (court “must accept
all the well-pleaded allegations of the complaint as true and must construe them in the
light most favorable to the plaintiff”), as well as “any documents attached as exhibits to
the complaint.” Oxendine v. Kaplan, 241 F.3d 1272, 1275 (10th Cir. 2001); see Fed. R.
Civ. P. 10(c) (“A copy of a written instrument that is an exhibit to a pleading is a part of
the pleading for all purposes.”).
The plaintiffs in this case consist of Gorsuch, Ltd. (“Gorsuch”), as well as
Gorsuch, Ltd. B.C.; Gorsuch, Limited at Aspen; Gorsuch Limited at Keystone Mountain
(collectively, the “Gorsuch Affiliates”); and Gorsuch Cooper, LLC. In 1966, Gorsuch
opened a retail store in Vail, Colorado “focused on high quality apparel, ski wear, ski
equipment, and fine home furnishings.” Docket No. 9 at 2, ¶ 13. Over the ensuing
years, the business grew, with additional stores being opened in Beaver Creek, Aspen,
and Keystone, Colorado, which were run by Gorsuch, Ltd. B.C., Gorsuch, Limited at
Aspen, and Gorsuch, Limited at Keystone Mountain. Gorsuch has also acquired real
estate over the years, including a property in Aspen, Colorado now owned by Gorsuch
Cooper, LLC.
During the growth of its business, Gorsuch has maintained a revolving line of
credit with United Bank of Denver and its successors Norwest Bank and defendant
Wells Fargo National Bank Association (“Wells Fargo”). Of particular relevance here,
Gorsuch entered into an October 31, 2008 Credit Agreement with Wells Fargo by which
it had access to a $14,000,000.00 line of credit to “finance [Gorsuch’s] working capital
requirements.” See Docket No. 9 at 6, ¶ 49; see also Docket No. 9-3 at 2, § 1.1(a).
“[T]he credit provided by Wells Fargo was for the benefit of Gorsuch, Ltd. and the
Gorsuch Affiliates, not just Gorsuch, Ltd. alone.” Docket No. 9 at 6, ¶ 48.
In its first claim for relief, Gorsuch contends that, on January 23, 2009, defendant
terminated this line of credit in violation of the Credit Agreement. In plaintiffs’ second
2
claim for relief, the Gorsuch Affiliates and Gorsuch Cooper seek to recover from
defendant as third party beneficiaries of the October 2008 Credit Agreement.
II. STANDARD OF REVIEW
“The court’s function on a Rule 12(b)(6) motion is not to weigh potential evidence
that the parties might present at trial, but to assess whether the plaintiff’s Complaint
alone is legally sufficient to state a claim for which relief may be granted.” Dubbs v.
Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir. 2003) (citations omitted). In doing so,
the Court “must accept all the well-pleaded allegations of the complaint as true and
must construe them in the light most favorable to the plaintiff.” Alvarado v. KOB-TV,
L.L.C., 493 F.3d 1210, 1215 (10th Cir. 2007) (quotation marks and citation omitted). At
the same time, however, a court need not accept conclusory allegations. Moffett v.
Halliburton Energy Servs., Inc., 291 F.3d 1227, 1232 (10th Cir. 2002).
Generally, “[s]pecific facts are not necessary; the statement need only ‘give the
defendant fair notice of what the claim is and the grounds upon which it rests.’”
Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007)) (omission marks, internal quotation marks, and
citation omitted). The “plausibility” standard requires that relief must plausibly follow
from the facts alleged, not that the facts themselves be plausible. Bryson v. Gonzales,
534 F.3d 1282, 1286 (10th Cir. 2008).
However, “where the well-pleaded facts do not permit the court to infer more
than the mere possibility of misconduct, the complaint has alleged – but it has not
shown – that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct.
3
1937, 1950 (2009) (internal quotation marks and alteration marks omitted). Thus, even
though modern rules of pleading are somewhat forgiving, “a complaint still must contain
either direct or inferential allegations respecting all the material elements necessary to
sustain a recovery under some viable legal theory.” Bryson, 534 F.3d at 1286
(quotation marks and citation omitted).
III. DISCUSSION
A. Motion to Dismiss Third Party Claim
Defendant seeks dismissal of plaintiffs’ second claim for relief on the grounds
that the October 2008 Credit Agreement excludes third parties from enforcing its
provisions. In the alternative, defendant argues that, if the Gorsuch Affiliates and
Gorsuch Cooper can enforce the terms of the Credit Agreement, they are subject to the
arbitration provision in the Credit Agreement.1 For the following reasons, the Court
finds that plaintiffs’ second claim for relief must be dismissed for failure to state a claim.
Therefore, the Court will not reach defendant’s alternative argument.
The October 2008 Credit Agreement was entered into between two parties,
Gorsuch, Ltd. and Wells Fargo. See Docket No. 9-3 at 2, 17.2 Under Colorado law,
1
Neither party argues that an arbitrator should resolve the question of whether
the Gorsuch Affiliates and Gorsuch Cooper may enforce the provisions of the October
2008 Credit Agreement. Cf. Riley Mfg. Co., Inc. v. Anchor Glass Container Corp., 157
F.3d 775, 779 (10th Cir. 1998) (“‘[T]he question of arbitrability — whether a [contract]
creates a duty for the parties to arbitrate the particular grievance — is undeniably an
issue for judicial determination. Unless the parties clearly and unmistakably provide
otherwise, the question of whether the parties agreed to arbitrate is to be decided by
the court, not the arbitrator.’”) (quoting AT&T Technologies v. Communications
Workers, 475 U.S. 643, 649 (1986)).
2
The Gorsuch Affiliates and Gorsuch Cooper signed the Agreement as
guarantors. See Docket No. 9-3 at 17.
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“‘[t]he general rule is that one who is not a party to a contract, and from whom no
consideration moved, has no connection therewith. He can avail himself of its terms
neither as a cause of action nor a defense.’” East Meadows Co., LLC v. Greeley Irr.
Co., 66 P.3d 214, 217 (Colo. App. 2003) (quoting Continental Casualty Co. v. Carver,
14 P.2d 181, 183 (Colo. 1932)).3 “However, a person who is not a party to an
agreement may enforce a contractual obligation if the promise to be enforced is
expressly stated in the contract, or is apparent from the agreement and surrounding
circumstances, and the benefit conferred is direct and not incidental.” Id.
Plaintiffs allege that the “Gorsuch Affiliates and Gorsuch Cooper, LLC are third
party beneficiaries of the contract between Gorsuch, Ltd. and Wells Fargo,” Docket No.
9 at 21, ¶ 145, and, therefore, are entitled to enforce its provisions. As noted above,
however, § 7.6 of the Agreement is entitled “NO THIRD PARTY BENEFICIARIES” and
states that the Agreement is “entered into for the sole protection and benefit of the
parties hereto and their respective permitted successors and assigns, and no other
person or entity shall be a third party beneficiary of, or have any direct or indirect cause
of action or claim in connection with, this Agreement or any other of the Loan
Documents to which it is not a party.” Docket No. 9-3 at 15, § 7.6. Plaintiffs identify no
other aspect of the Agreement that would render this provision inapplicable or
ambiguous. See Concrete Contractors, Inc. v. E.B. Roberts Construction Co., 664 P.2d
3
The parties agree that Colorado law should apply. See Peck v. Horrocks
Engineers, Inc., 106 F.3d 949, 952 (10th Cir. 1997) (“Jurisdiction of this case arose in
the district court under 28 U.S.C. § 1332(a)(1) diversity jurisdiction; accordingly, we
must apply state law to the substantive issues of this appeal.”) (citations omitted); see
also Docket No. 9-3 at 15, § 7.10 (“This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado.”).
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722, 725 (Colo. App.1982) (“The key question is the intent of the parties to the actual
contract to confer a benefit on a third party. That intent must appear from the contract
itself or be shown by necessary implication. It is a question of fact to be determined by
the terms of the contract taken as a whole, construed in the light of the circumstances
under which it was made and the apparent purpose the parties were trying to
accomplish.”).
Plaintiffs’ attempts to avoid the clear language of this provision are unavailing. In
response to defendant’s motion, they argue that the circumstances surrounding the
formation of the Credit Agreement reflect that defendant intended the line of credit to
“be for the use and benefit of all of the Gorsuch [b]usinesses.” Docket No. 20 at 10-11.
While plaintiffs allege that Wells Fargo intended to directly benefit the third parties, the
contractual provision excluding third parties contradicts that allegation. In resolving a
motion to dismiss, it has long been held that allegations do not overcome contradictory
facts in attached written instruments. See Simmons v. Peavy-Welsh Lumber Co., 113
F.2d 812, 813 (5th Cir. 1940) (“Where there is a conflict between allegations in a
pleading and exhibits thereto, it is well settled that the exhibits control.”); see also
Flannery v. Recording Indus. Ass’n of America, 354 F.3d 632, 638 (7th Cir. 2004)
(“[W]hen a document contradicts a complaint to which it is attached, the document’s
facts or allegations trump those in the complaint.”); 5A Wright & Miller, Federal Practice
and Procedure: Civil § 1327 (3d ed. 2011) (“It appears to be well settled that when a
disparity exists between the written instrument annexed to the pleadings and the
allegations in the pleadings, the terms of the written instrument will control, particularly
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when it is the instrument being relied upon by the party who made it an exhibit.”); cf.
Fed. R. Civ. P. 10(c).4
It is true that “the circumstances surrounding the execution or performance of a
contract can be sufficient alone, if substantial, to establish the existence of an intended
beneficiary to the contract and the nature of the promise that the beneficiary can
enforce.” E.B. Roberts Const. Co. v. Concrete Contractors, Inc., 704 P.2d 859, 865 n.7
(Colo. 1985). In so finding, however, the Colorado Supreme Court quoted section
302(b) of the Restatement (Second) of Contracts, which provides that “‘a beneficiary of
a promise is an intended beneficiary if recognition of a right to performance in the
beneficiary is appropriate to effectuate the intention of the parties and . . . [t]he
circumstances indicate that the promisee intends to give the beneficiary the benefit of
the promised performance.’” Id. The Restatement made clear that such was the case
“‘[u]nless otherwise agreed between promisor and promisee.’” Id. Here, as discussed
above, the parties expressly stated their intent by inclusion of § 7.6 in the Agreement.
Cf. Ohio Sav. Bank v. Manhattan Mortg. Co., Inc., 455 F. Supp. 2d 247, 251-52
4
Plaintiffs argue that agreements entered into between Gorsuch Affiliates and
defendant provide a basis to conclude that the Affiliates can enforce the provisions of
the October 2008 Credit Agreement. See Docket No. 20 at 12-15. The agreements
they attach to their response, however, only emphasize that the Affiliates are third
parties to the Credit Agreement who, in exchange for receiving some benefit from the
extension of credit to Gorsuch, have agreed to offer security in support of the
guaranties. See, e.g., Docket No. 20-1 at 2 (“Corporate Resolution: Third Party
Collateral”); Docket No. 20-1 at 4 (“Third Party Security Agreement, Rights to Payment
and Inventory”). None of these agreements evince any intent by Wells Fargo and
Gorsuch, Ltd. to confer direct benefits on any third party. See Concrete Contractors,
664 P.2d at 725 (third party may only enforce contractual obligation if “benefit conferred
is direct and not incidental”) (quoting Borwick v. Bober, 529 P.2d 1351, 1355 (Colo.
App. 1974)).
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(S.D.N.Y. 2006) (“Clear contractual language that excludes third parties from asserting
rights under the terms of a contract ends any analysis of the third party beneficiary
issue, and prevents the court from considering parol evidence of intent.”); Sovereign
Bank v. BJ’s Wholesale Club, Inc., 395 F. Supp. 2d 183, 191-92 (M.D. Pa. 2005)
(noting that “other courts have also concluded that a third party cannot sue on a
contract that affirmatively excludes third parties from the contract’s benefits” and
collecting cases).
Plaintiffs argue that Gorsuch Cooper is an “assignee” not subject to the exclusion
in § 7.6. Section 7.6, however, only entitles “permitted successors and assigns” to
enforce the Agreement, Docket No. 9-3 at 15, § 7.6 (emphasis added), and § 7.4
provides that Gorsuch, Ltd. “may not assign or transfer its interests or rights [under the
Agreement] without [Wells Fargo’s] prior written consent.” Docket No. 9-3 at 14, § 7.4.
While plaintiffs allege that Wells Fargo was “fully aware” that Gorsuch assigned to
Gorsuch Cooper its rights in a property purchased with proceeds from a January 7,
2004 Credit Agreement, Docket No. 9 at 4, ¶ 29, plaintiffs do not allege that Gorsuch
ever received permission, or even attempted, to assign any rights under that or any
other credit agreement.
The Court, therefore, finds that plaintiffs have failed to state a viable third party
beneficiary claim against defendant. See The Arc of the Pikes Peak Region v. National
Mentor Holdings, Inc., No. 10-cv-01144-REB-BNB, 2011 WL 1047081, at *5 (D. Colo.
March 18, 2011) (dismissing third party beneficiary claims in light of contractual
provisions “provid[ing] explicitly that third parties . . . are not entitled to enforce the
provisions of the contract”). The dismissal of the second claim for relief moots the Third
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Party Beneficiary Plaintiffs’ Motion for Partial Summary Judgment Re: Breach of
Contract [Docket No. 28] and the motion for leave to file a surreply to defendant’s
motion to dismiss [Docket No. 30] as the proposed surreply addresses an issue related
only to defendant’s alternative arbitration argument.
B. Motion to Compel Arbitration
In light of the foregoing, the only remaining claims in this case are brought by
Gorsuch, Ltd. against defendant. Defendant seeks to compel arbitration of those
claims pursuant to § 7.11 of the October 2008 Credit Agreement, whereby the parties
agreed “to submit to binding arbitration all claims, disputes and controversies between
or among them” relating to the Credit Agreement. Docket No. 9-3 at 15, § 7.11(a).
Section 3 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 3, provides that:
If any suit or proceeding be brought in any of the courts of the United
States upon any issue referable to arbitration under an agreement in writing
for such arbitration, the court in which such suit is pending, upon being
satisfied that the issue involved in such suit or proceeding is referable to
arbitration under such an agreement, shall on application of one of the
parties stay the trial of the action until such arbitration has been had in
accordance with the terms of the agreement, providing the applicant for the
stay is not in default in proceeding with such arbitration.
Gorsuch concedes that § 7.11 requires arbitration of its claims against defendant.
Gorsuch, however, seeks to have the arbitration “stayed pending resolution of the
claims being litigated in this Court between Wells Fargo and the other Gorsuch
Plaintiffs.” Docket No. 21 at 2, ¶ 8; see Docket No. 22 (“Motion to Stay Arbitration
Proceeding Between Gorsuch, Ltd. and Wells Fargo National Bank Association”).
Because those third party beneficiary claims will be dismissed for the reasons stated
above, plaintiffs’ request to delay the arbitration of Gorsuch’s claims is now moot.
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Therefore, the Court will grant defendant’s motion to compel arbitration and to stay this
action.5
IV. CONCLUSION
For the foregoing reasons, it is
ORDERED that defendant’s Motion to Dismiss Plaintiffs’ Second Claim for Relief
as Amended Pursuant to Fed. R. Civ. P. 12(b)(6) [Docket No. 14] is GRANTED.
Plaintiffs’ second claim for relief is dismissed. Plaintiffs Gorsuch Ltd., B.C.; Gorsuch,
Limited at Aspen; Gorsuch, Limited at Keystone Mountain; and Gorsuch Cooper, LLC
are dismissed from this case. It is further
ORDERED that plaintiffs’ Motion to Stay Arbitration Proceeding Between
Gorsuch, Ltd. and Wells Fargo National Bank Association [Docket No. 22], the Third
Party Beneficiary Plaintiffs’ Motion for Partial Summary Judgment Re: Breach of
Contract [Docket No. 28], and plaintiffs’ motion for leave to file a surreply [Docket No.
30] are DENIED as moot. It is further
ORDERED that defendant’s Motion to Compel Arbitration as to Amended Claims
Asserted by Plaintiff Gorsuch, Ltd. and to Stay Further Proceedings as to Such Claims
[Docket No. 15] is GRANTED. It is further
ORDERED that this case is STAYED and the parties shall proceed with
arbitration in accordance with the arbitration agreement. It is further
ORDERED that this case shall be administratively closed, pursuant to
5
Defendant also requests “the costs and expenses it has incurred in the filing of
this Motion to Compel Arbitration” pursuant to § 7.11(b) of the Credit Agreement. See
Docket No. 15 at 3. The Court will not address this request until such time as
defendant complies with D.C.COLO.LCivR 54.3.
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D.C.COLO.LCivR 41.2. If no action is taken to reopen this case before December 1,
2012, the case will be dismissed without prejudice without any further notice to either
party.
DATED November 17, 2011.
BY THE COURT:
s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge
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