Buridi v. Branch Banking and Trust Company

Filing 48

MEMORANDUM OPINION by Senior Judge Charles R. Simpson, III on 3/6/2014; re 26 MOTION to Amend/Correct Verified Complaint, 35 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM; a separate order will be entered in accordance with this opinion. cc:counsel (TLB)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
ABDUL G. BURIDI

PLAINTIFF

v.

CIVIL ACTION NO. 3:12-CV-00486-CRS

BRANCH BANKING AND
TRUST COMPANY

DEFENDANT
MEMORANDUM OPINION

This case is before the Court on a motion to amend complaint (DN 26) filed by Plaintiff
Abdul G. Buridi (“Buridi”) and a motion to dismiss (DN 35) filed by Defendant Branch Banking
and Trust Company (“BB&T”). For the reasons set forth below, the Court will grant the motion
to amend complaint, and deny the motion to dismiss.
BACKGROUND
Unless otherwise indicated, the following facts are undisputed. Buridi is a member of
Kentuckiana Investors, LLC (“KI”), a group of physician-investors who collectively invested in
a hospital construction project in Clark County, Indiana. As originally conceived, the
construction plan called for a 60-bed hospital, with 12 beds to be used as an emergency
department. In fall 2006, BB&T agreed to loan $21.5 million to finance the construction of the
hospital, but only on condition that Buridi and several other physician-investors personally
guaranteed repayment of the debt. On July 12, 2007, Buridi signed a guaranty agreement (the
“Guaranty”) in an unspecified amount.
Shortly thereafter, the loan was finalized and construction of the hospital began. Contrary
to the initial plan, however, the hospital was constructed with only 34 beds and without an
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emergency department. After opening, the hospital suffered severe financial problems, ultimately
causing it to default on the loan from BB&T. Upon default, BB&T assigned the loan along with
Buridi’s Guaranty to Rialto Capital Management (“Rialto”).
In February 2011, Rialto’s affiliate RL BB Financial, LLC (“RLBB”), filed an action in
Clark County Circuit Court seeking to enforce Buridi’s Guaranty. Upon RLBB’s motion for
summary judgment, final judgment was entered against Buridi in the amount of $430,000.
However, on August 27, 2012, Buridi filed a motion for relief from judgment pursuant to Indiana
Trial Procedure Rule 60(B)(2), alleging that newly discovered evidence demonstrated that Buridi
could have asserted a fraud defense to enforcement of the Guaranty. In his motion, Buridi
explained that he had obtained new evidence during the course of a related action he had filed
against various members of KI in Jefferson County Circuit Court. Specifically, Buridi claimed
that the deposition testimony of Drs. Christodulous Stavens (“Stavens”) and Eli Hallal
(“Hallal”), as well as certain documents produced during discovery, strongly suggested that
BB&T was aware that the hospital would be built with only 34 beds at the time it solicited his
Guaranty. Based on this evidence, Buridi claimed that BB&T had committed fraud sufficient to
void his Guaranty. Ultimately, however, the court denied Buridi’s motion for relief from
judgment on the grounds that the evidence failed to establish a basis for finding fraud on the part
of BB&T.
PROCEDURAL HISTORY
On July 12, 2012, Buridi filed the present action in Jefferson County Circuit Court,
alleging that BB&T’s failure to disclose the change in construction plans amounted to fraud by
omission, negligent misrepresentation, and a breach of its duty of good faith and fair dealing. On
August 10, 2012, BB&T removed the action on the basis of diversity jurisdiction. (DN 1).

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On August 24, 2012, BB&T filed a motion to dismiss for failure to state a claim, arguing
that: 1) BB&T did not have a duty to inform Buridi regarding the change in scope of the
construction project; and 2) that Buridi’s claims were barred by the doctrine of claim preclusion
to the extent they should have been raised as defenses in the RLBB action. On March 25, 2013,
we held that: 1) Buridi had failed to establish necessary elements of his fraud by omission and
negligent misrepresentation claims; and 2) Buridi’s good faith and fair dealing claim was not
barred by the doctrine of claim preclusion because the claim had not accrued at the time of the
earlier suit. (DN 20).
On May 7, 2013, Buridi filed a motion to amend complaint (DN 26) seeking to add a
claim of intentional misrepresentation. In response, BB&T argues that Buridi’s proposed
amendment is futile to the extent his newly asserted intentional representation claim is barred by
the doctrine of claim preclusion. Additionally, BB&T has renewed its previous motion to dismiss
(DN 35) Buridi’s good faith and fair dealing claim on the grounds that it was also barred by the
doctrine of claim preclusion.
Having considered the parties’ briefs and being otherwise sufficiently advised, the Court
will now address the motion to amend complaint and the motion to dismiss.
STANDARD
A court must first consider a pending motion to amend before dismissing a complaint.
Rice v. Karsch, 154 F. App'x 454, 465 (6th Cir. 2005). Accordingly, the Court will address the
motion to amend complaint prior to the motion to dismiss.
i. Motion to Amend Complaint
Fed. R. Civ. P. 15(a)(2) provides that leave to amend pleadings should be “freely
give[n]... when justice so requires.” Generally, a plaintiff's motion for leave to amend his

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complaint should be granted absent “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 the amendment, [or] futility of amendment…”
Foman v. Davis, 371 U.S. 178, 182 (1962). However, “[d]elay by itself is not sufficient reason to
deny a motion to amend.” Wade v. Knoxville Utils. Bd., 259 F.3d 452, 458 (6th Cir. 2001)
(quoting Head v. Jellico Hous. Auth., 870 F.2d 1117, 1123 (6th Cir. 1989)).
ii. Motion to Dismiss
When evaluating a motion to dismiss under Rule 12(b)(6), the Court must determine
whether the complaint alleges “sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible if “the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Although the complaint
need not contain “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.” Twombly, 550 U.S. at 555 (internal quotation
marks and alteration omitted).
DISCUSSION
i. Motion to Amend Complaint
BB&T argues that the motion to amend complaint must be denied as futile because
Buridi’s newly asserted fraud claim is barred by the doctrine of claim preclusion. According to
BB&T, this claim was previously adjudicated as part of Buridi’s Rule 60(B) motion for relief
judgment in the RLBB action, and therefore cannot be relitigated in this action.

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In response, Buridi argues that the court’s ruling on his Rule 60(B) motion does not
constitute a final judgment on the merits warranting preclusive effect. While conceding that the
court’s resolution of his motion involved factual and legal issues related to his fraud claim,
Buridi argues that the court’s ruling nevertheless did not amount to “a judgment which
determine[d] which party is right as to the cause of action in dispute,” (Pl.’s Rep. in Supp. of
Mot. to Amend Comp., DN 38, at 9) (quoting Creech v. Town of Walkerton, 472 N.E.2d 226,
228 (Ind. App. 1984), insofar as a Rule 60(B) motion is procedurally distinct from a substantive
judgment on the merits. In support of this argument, Buridi cites the following excerpt from the
Indiana Court of Appeals’ decision in Creech v. Town of Walkerton, 472 N.E.2d 226 (Ind. Ct.
App. 1984):
“A judgment on the merits precluding the relitigation of the same cause of
action is one based on the legal rights and liabilities of the parties, as
distinguished from one based on technical or dilatory objections or contentions, or
on mere matters of form or of practice or procedure. It is a judgment which
determines which party is right as to the cause of action in dispute, if the
judgment determines that the plaintiff has no cause of action against the
defendant, the plaintiff in respect thereto is permanently out of court. In this
respect, it is immaterial whether the determination is made on an issue of law or
fact. Moreover, to constitute a judgment on the merits, it is not necessary to
consider all the merits; due consideration of vital ones will usually determine the
matter as to all issues.
A decision with respect to the rights and liabilities of the parties is on the
merits where it is based on the ultimate fact or state of facts disclosed by the
pleadings or evidence, or both, and on which the right of recovery depends. If the
case is brought to an issue, heard on evidence submitted pro and con, and decided
by the verdict of a jury or the findings of a court, the judgment rendered is on the
merits. However, a decision on the merits is not necessarily a decision upon the
facts, or upon evidence heard. Indeed, it is not even necessary that there should
have been a trial; if the parties had a full legal opportunity to be heard on their
respective claims and contentions, the judgment may be on the merits although
there was no actual hearing or argument in the case.”
Id. at 228 (quoting 46 AM.JUR.2D JUDGMENTS § 478 (1969)).

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After careful review, the Court concludes that the court’s ruling on Buridi’s Rule 60(B)
motion does not constitute a final judgment on the merits warranting preclusive effect. Like its
federal counterpart, Indiana Trial Procedure Rule 60(B) motions for relief from judgment request
extraordinary relief and consequently are subject to a stringent standard of proof. Under Indiana
law, “[r]elief from judgment based upon newly discovered evidence requires a showing that the
newly discovered evidence is material, is not merely cumulative or impeaching, was not
discoverable by due diligence, and would reasonably and probably alter the result.” Outback
Steakhouse of Florida, Inc. v. Markley, 856 N.E.2d 65, 85 (Ind. 2006) (emphasis added). Here,
the trial court’s ruling was apparently based on its determination that the evidence relied on by
Buridi would not reasonably and probably alter the result. As explained by the court:
The relief sought by… Buridi is extraordinary relief and generally viewed with
disfavor. The Court denied the requested relief in part because the evidence
produced and thus the arguments advanced as a result of that evidence are based
on speculation and assumption. The fact that the managing investors and BB&T
had knowledge of the change [in construction plans] is not sufficient to set aside
the prior judgment. Additionally the evidence does not set forth a basis to find
fraud on the part of BB&T.
(Order of Clark County Circuit Court, DN 34-4, at ¶ 7) (emphasis added).
Based on the court’s prefatory reminder that the relief sought by Buridi is “extraordinary
relief” which is “generally viewed with disfavor,” as well as the patently procedural basis of the
decision, we conclude that the ruling on Buridi’s Rule 60(B) motion does not amount to “a
judgment which determines which party is right as to the cause of action in dispute.” Creech v.
Town of Walkerton, 472 N.E.2d 226, 228 (Ind. App. 1984). To the contrary, the ruling merely
determined that, as a procedural matter, the evidence relied on by Buridi in support of his
motion1 would not probably alter the result such that his interest in vacating the judgment

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The Court notes that the evidence relied on by Buridi in support of his Rule 60(B) motion has not been definitively
shown to be the only evidence of fraud on the part of BB&T. To the extent this could mean that the court did not

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outweighed the judicial system’s interest in the finality of judgments. For these reasons, the
Court simply cannot conclude that the ruling was “based on the ultimate fact or state of facts
disclosed by the pleadings or evidence… and on which the right of recovery depends.” Id. Thus,
Buridi’s fraud claim is not barred by the doctrine of claim preclusion, and his proposed
amendment is therefore not futile. Accordingly, the Court will grant the motion to amend
complaint.
ii. Motion to Dismiss
BB&T has renewed its previous motion to dismiss Buridi’s good faith and fair dealing
claim on the grounds that it is barred by the doctrine of claim preclusion to the extent it was
previously adjudicated as part of his Rule 60(B) motion. For the reasons set forth above, as well
as those initially set forth in the Court’s Memorandum Opinion (DN 20), the Court concludes
that Buridi’s good faith and fair dealing claim is not barred by the doctrine of claim preclusion.
Accordingly, the motion to dismiss will be denied.

A separate order will be entered in accordance with this opinion.

C al R Smpo I , ei J d e
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March 6, 2014

base its decision on all the relevant evidence, there is an additional basis for concluding that the ruling was not
“based on the ultimate fact or state of facts disclosed by the pleadings or evidence… and on which the right of
recovery depends”, and therefore does not constitute “a judgment which determines which party is right as to the
cause of action in dispute.” Creech v. Town of Walkerton, 472 N.E.2d 226, 228 (Ind. App. 1984).

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