Seneca One Finance, Inc. v. Structured Asset Funding, LLC

Filing 25

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 11/4/10. (sat, Chambers)

Seneca One Finance, Inc. v. Structured Asset Funding, LLC

Doc. 25

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND SENECA ONE FINANCE, INC. v. STRUCTURED ASSET FUNDING, LLC : : : : : Civil Action No. DKC 10-1704

MEMORANDUM OPINION Presently pending and ready for resolution in this contract dispute are motions filed by Defendant Structured Asset Funding, LLC, for a more definite statement (ECF No. 13), and to stay or, in the alternative, to transfer venue (ECF No. 11). The motions

are fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that

follow, the motion for a more definite statement will be denied and the motion to stay will be granted. I. Background A. Factual Background

The following facts are set forth in Plaintiff's complaint. Plaintiff Seneca One Finance, Inc., a Maryland corporation with its principal in the place of business of in Bethesda, Maryland, is

engaged annuity

business from

purchasing

structured Typically,

settlement Plaintiff

payments

annuitants.

negotiates and enters into contracts with structured settlement

Dockets.Justia.com

annuitants for the purchase of future payments in exchange for lump sums of cash. The lump sum amounts are funded by outside

sources to which Plaintiff subsequently assigns the rights to receive future annuity payments. Thus, Plaintiff's role in

these transactions is essentially that of a broker, and the success of its business depends greatly on the reliability of its funding sources and the "discount rates" they offer to

Plaintiff. In or

(ECF No. 2, ¶ 3). around with September 2008, Plaintiff Asset "reached Funding, an LLC,

agreement"

Defendant

Structured

pursuant to which Defendant "would fund [Plaintiff's] structured settlement transactions" and Plaintiff would assign to Defendant the rights to future annuity payments. (Id. at ¶ 10).1 In

reliance on this agreement, Plaintiff "expended significant time and resources underwriting and processing transactions . . . and

At the time the complaint was filed, Defendant was a Florida limited liability company with two members, both of whom were Florida residents. (ECF No. 1, ¶ 2). Since that time, Defendant has merged with a Nevada limited liability company of the same name. (ECF No. 24, Ex. 1, Nevada certification). On October 11, 2010, Defendant moved, pursuant to Fed.R.Civ.P. 25(c), to substitute the Nevada limited liability company as the proper defendant in this action. (ECF No. 23). Rule 25(c) provides, in pertinent part, that when "an interest is transferred, the action may be continued by or against the original party unless the court, on motion, orders the transferee to be substituted in the action . . . ." Plaintiff has not opposed this motion. Because substitution in this manner does not affect the court's jurisdiction, see FreeportMcMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426, 428-29 (1991), Defendant's motion to substitute will be granted. 2

1

procured additional purchase agreements with numerous structured settlement annuitants." (Id. at ¶ 11). In eighteen subsequent

transactions, however, Defendant "committed to funding . . . at certain agreed upon discount the rates rates, it and then to without

justification

increased

charged

[Plaintiff]"

(id. at ¶ 12); in twenty-six others, Defendant "promised to fund transactions at given, agreed-upon rates," and later "refus[ed] to fund the transactions at all," thereby requiring Plaintiff to "procure[] discount funding rates" from at other ¶ sources and that in charged higher set of

(id.

13);

"another

transactions," Defendant "engag[ed] in obstructive and dilatory tactics by failing to tell [Plaintiff] that, contrary to its prior promises, it would not fund certain transactions,

resulting in [Plaintiff's] customers cancelling their contracts" (id. at ¶ 14). B. Procedural Background

On or about March 26, 2010, Plaintiff's counsel sent a letter to Andrew Savysky, Defendant's president, alleging that Defendant had "fail[ed] to keep its promises, representations, and commitments with respect to the funding of certain

structured settlement transactions," and stating its intent to litigate if a settlement demand of $630,000.00 was not met. (ECF No. 12, Attach. 2). Defendant's counsel responded, by

letter dated April 8, with a request that Plaintiff provide more 3

information,

such

as

copies

of

the

contracts

and/or

written

communications underlying its claims.

(Id. at Attach. 3).

On April 16, 2010, Defendant commenced an action in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, seeking a declaratory judgment that no "rights Attach. and 4, obligations Florida exist" between at ¶ the parties. Four days (Id., later,

complaint,

19).

Plaintiff filed the instant complaint against Defendant in the Circuit Court for Montgomery County, Maryland, alleging breach of contract and promissory estoppel. (ECF No. 2). Defendant

was served with the complaint on June 4, and removed the case to this court on June 25, asserting diversity of citizenship as the jurisdictional basis. (ECF No. 1).

On June 28, 2010, Defendant filed a motion to stay this action pending resolution of the state case or, in the

alternative, to transfer venue to the United States District Court for the Southern District of Florida, Fort Lauderdale

Division (ECF No. 11), and separately filed a motion for a more definite statement (ECF No. 13). these motions. II. (ECF Nos. 19, 20). Plaintiff has opposed both of

Motion for a More Definite Statement Pursuant to Fed.R.Civ.P. 8(a)(2), "a pleading that states a

claim for relief must contain . . . a short and plain statement

4

of the claim showing that the pleader is entitled to relief." Rule 12(e) provides, in relevant part: A party may move for a more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response. The motion must be made before filing a responsive pleading and must point out the defects complained of and the details desired. As the United States District Court for the Eastern District of Virginia explained in Frederick v. Koziol, 727 F.Supp. 1019, 1020-21 (E.D.Va. 1990): Such a motion is not a substitute for the discovery process, and where the information sought by the movant is available or properly sought through discovery, the motion should be denied. [Famolare, Inc. v. Edison Bros. Stores, Inc., 525 F.Supp. 940, 949 (E.D.Cal. 1981)]; Wheeler v. United States Postal Service, 120 F.R.D. 487, 488 (M.D.Pa. 1987). The motion for more definite statement is "designed to strike at unintelligibility rather than simple want of detail," and the motion will be granted only when the complaint is so vague and ambiguous that the defendant cannot frame a responsive pleading. Scarbrough v. R-Way Furniture Co., 105 F.R.D. 90, 91 (E.D.Wis. 1985); see Wilson v. United States, 585 F.Supp. 202, 205 (M.D.Pa. 1984); In re Arthur Treacher's Franchisee Litigation, 92 F.R.D. 398, 406 (E.D.Pa. 1981). See also Khair v. Countrywide Home Loans, Inc., No. 1:10cv410 (JCC), 2010 WL 2486430, at *2 (E.D.Va. June 14, 2010) (citing Frederick for the same proposition). The decision of whether to

grant a motion for a more definite statement is committed to the 5

discretion of the district court. 523 U.S. 574, 597-98 (1998).

See Crawford-El v. Britton,

Plaintiff's complaint is not "so vague and ambiguous" that Defendant cannot reasonably be expected to prepare a response. As noted, the complaint alleges two counts: breach of contract and promissory estoppel. Under Maryland law, "[t]o prevail in

an action for breach of contract, a plaintiff must prove that the defendant owed the plaintiff a contractual obligation and that the defendant N.A., breached 365 Md. that obligation." (2001). The Taylor v.

NationsBank,

166,

175

complaint

plainly states that, in or around September 2008, the parties "reached an agreement" that Defendant would provide funding for Plaintiff's exchange, receive structured settlement assign transactions, to Defendant No. 2, and the ¶ that, rights 10). in to The either

Plaintiff

would

future

annuity

payments. that

(ECF

complaint

further

asserts

Defendant,

thereafter,

unilaterally altered terms as to the agreed rates of funding or refused to provide funding altogether, in breach of the parties' agreement. Thus, the elements of a claim for breach of contract

are clearly presented. Plaintiff's stated. promissory estoppel claim is also plainly

To succeed on such a claim, Plaintiff must show four

elements, which Maryland courts have adopted from Restatement (Second) of Contracts § 90(1) (1979): 6

1. a clear and definite promise; 2. where the promisor has a reasonable expectation that the offer will induce action or forbearance on the part of the promisee; 3. which does induce actual and reasonable action or forbearance by the promisee; and 4. causes a detriment which can only be avoided by the enforcement of the promise. Pavel Enters., Inc. v. A.S. Johnson Co., Inc., 342 Md. 143, 166 (1996); see also Union Trust Co. of Md. v. Charter Medical

Corp., 663 F.Supp. 175, 178 n. 4 (D.Md. 1986).

Here, Plaintiff

has alleged that Defendant "made promises . . . to fund certain transactions at specified rates" (ECF No. 2, ¶ 21); that

Defendant "reasonably expected that its promises would induce [Plaintiff] to proceed with certain purchase agreements and

enter into additional purchase agreements" (id. at ¶ 22); that those promises did induce Plaintiff to take such actions; and that Plaintiff incurred damages as a result. may dispute whether clear promises were, While Defendant in fact, made,

Plaintiff's promissory estoppel claim is not unintelligible. Defendant contends that it cannot reasonably be expected to answer Plaintiff's complaint because it "cannot admit or deny the existence of a contract whose terms remain a mystery, nor can it admit or deny the existence of unspecified transactions or the correctness of unspecified rates." (ECF No. 14, at 3).

7

In support of this argument, Defendant cites 555 M Mfg., Inc. v. Calvin Klein, Inc., 13 F.Supp.2d 719, 724 (N.D.Ill. 1998), for the proposition that, "[i]n a contract dispute, a more definite statement is required when defendants can only guess as to what conduct and contract(s) [an] allegation refers." (Internal

marks omitted).

In that case, the court granted a motion for a

more definite statement where the complaint failed to "identify what oral agreements were made, when they were made, what

representatives of [the parties] made the agreements, or what the contents of those oral agreements were." 13 F.Supp.2d at 724. The agreement 555 M Mfg., Inc., in the instant

alleged

complaint is described in considerably more detail. Defendant's purported inability to admit or deny

Moreover, Plaintiff's

claims is dubious in light of the complaint it filed in Florida state court, which describes at length the business dealings between the parties, expressly denies that any contractual

"rights and obligations exist," and seeks a declaratory judgment to that effect. Defendant's formulate a (ECF No. 12, Attach. 4, at ¶ 19). primary to contention Plaintiff's is not that but it cannot the

response

complaint,

that

complaint lacks sufficient detail concerning the precise terms of the alleged agreement. That argument might have been

persuasive in the context of a motion to dismiss under Rule 12(b)(6) ­ particularly under the standard set forth by the 8

Supreme

Court

in

Bell

Atl.

Corp.

v.

Twombly,

550

U.S.

544

(2007), and Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937 (2009) ­ but in the present context it is not. See Frederick,

727 F.Supp. at 1021 ("[t]he motion for more definite statement is `designed to strike at unintelligibility rather than simple want of detail'" (quoting Scarbrough, 105 F.R.D. at 91)).

Accordingly, Defendant's motion for a more definite statement will be denied. III. Motion to Stay or, in the Alternative, to Transfer Venue Defendant contends that this action should be stayed,

pending resolution of the Florida state court matter, pursuant to the doctrine established by the Supreme Court of the United States in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976). Generally, "our dual system of federal and state

governments allows parallel actions to proceed to judgment until one becomes preclusive of the other." Chase Brexton Health

Services, Inc. v. Maryland, 411 F.3d 457, 462 (4th Cir. 2005). Thus, the mere fact that an action is pending in a state court "is no bar to proceedings concerning the same matter in the Federal court having jurisdiction." McLaughlin v. United Va.

Bank, 955 F.2d 930, 934 (4th Cir. 1992) (internal marks omitted). Indeed, "federal courts are bound by a `virtually unflagging obligation . . . to exercise the jurisdiction given them.'" 9

Chase Brexton, 411 F.3d at 462 (quoting McClellan v. Carland, 217 U.S. 268, 282 (1910)). It is well established, however,

that "federal courts may decline to exercise their jurisdiction, in otherwise `exceptional circumstances,' where denying a

federal forum would clearly serve an important countervailing interest.'" (1996) Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 Colorado River, 424 U.S. at 813). The

(quoting

"exceptional circumstances" in which abstention is appropriate "inevitably relate to a policy of of avoiding unnecessary federal-state

constitutional relations."

decisions

and

accommodating

Chase Brexton, 411 F.3d at 462.

"Abstention from

the exercise of federal jurisdiction is the exception, not the rule." In Colorado River, 424 U.S. at 813. Colorado River, the Supreme Court recognized that

dismissal of a duplicative federal action may be appropriate when "[wise] judicial administration, giving regard to

conservation of judicial resources and comprehensive disposition of litigation" favors abstention. Colorado River, 424 U.S. at

817 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183 (1952)).2 whether Colorado River The "threshold question in deciding is appropriate is whether

abstention

Where, as here, "a suit seek[s] only money damages, a federal court may invoke abstention principles only for the purposes of staying the action . . . ." Quackenbush, 517 U.S. at 721. 10

2

there are parallel federal and state suits." F.3d at 463. a number of

Chase Brexton, 411

If the suits are parallel, the court must balance factors in considering whether "exceptional

circumstances" are presented, thereby warranting its abstention. See Gannett Co. v. Clark Constr. Group, Inc., 286 F.3d 737, 741 (4th Cir. 2002). "Simultaneous federal and state suits are deemed parallel if `substantially the same parties litigate substantially the same issues.'" Extra Storage Space, LLC v. Maisel-Hollins

Development Co., 527 F.Supp.2d 462, 466 (D.Md. 2007) (quoting New Beckley Mining Corp. v. Int'l Union, UMWA, 946 F.2d 1072, 1073 (4th Cir. 1991)). The similarity of the suits is generally

assessed in terms of the identity of the parties, the legal issues, and the remedies sought in the respective cases. See

Great American Ins. Co. v. Gross, 468 F.3d 199, 207-08 (4th Cir. 2006). Here, parallel. operative presented. the federal and state suits are unquestionably

The parties are identical, the cases involve the same facts, and substantially similar legal issues are

See Covance Labs, Inc. v. Orantes, 338 F.Supp.2d

613, 616 (D.Md. 2004) (finding parallel suits where parties were "substantially operative similar" and the cases & "involved Programming, the same v.

facts");

Automated

Systems

Inc.

Cross, 176 F.Supp.2d 458, 462 (D.Md. 2001) (finding federal and 11

state

cases

"unquestionably

parallel"

where

the

parties

were While

identical and the issues were "substantially the same").

it is true, as Plaintiff asserts, that the remedies sought are nominally whether (ECF No. different, and resolution obligations 4, at ¶ of both cases between See will the turn on

"rights 12, at

exist" 19).

parties. Labs, 338

Attach. 617

Covance

F.Supp.2d

(finding

remedies

"functionally

equivalent"

where resolution of the issue in state court would preclude litigation of federal claims). "Because the parties, the

operative facts, and the issues underlying both the state and federal suits are substantially similar, the . . . negligible difference in remedies sought does not require a finding that the suits are not parallel." Having parallel, determined the that Id. the turns federal to and state suits are

analysis

whether

"exceptional

circumstances" are presented warranting this court's abstention. Although not a "rigid test, the Supreme Court has recognized several factors case that are relevant such in determining whether a

particular

presents

exceptional

circumstances."

Gannett Co., 286 F.3d at 741.

These factors include:

(1) whether the subject matter of the litigation involves property where the first court may assume in rem jurisdiction to the exclusion of others; (2) whether the federal forum is an inconvenient one; (3) the desirability of avoiding piecemeal litigation; (4) the relevant order in which 12

the courts obtained jurisdiction and the progress achieved in each action; (5) whether state law or federal law provides the rule of decision on the merits; and (6) the adequacy of the state proceedings to protect the parties' rights. Great American Ins. Co., 468 F.3d at 207-08. Here, the parties agree that the first factor is

inapplicable, as there is no real property at issue. The second factor, i.e., inconvenience of the federal

forum, counsels slightly against abstention because the record does not support a finding that the federal forum is any more or less convenient than the state court forum. 286 F.3d at 748 n. 10 (In light of See Gannett Co., the "exceptional

circumstances" standard, where a factor "does not weigh heavily in favor of exercising federal jurisdiction," it nevertheless "counsels against abstention"). "[C]onvenience refers to the

`relative ease of access to sources of proof, availability of compulsory process for attendance of unwilling witnesses, and the cost of obtaining attendance of willing witnesses." Holland

v. Hay, 840 F.Supp. 1091, 1100 (E.D.Va. 1994) (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947)). Defendant contends

that "[t]he relative ease of access to sources of proof and the availability of compulsory process weighs in neither direction." (ECF No. 12, at 8). Plaintiff, on the other hand, argues that

Defendant's response to its demand letter, requesting supporting

13

documentation as to the agreement at issue, suggests that "[a]ny documents responsive to [Defendant's] requests are in Maryland, as are the witnesses who would authenticate and testify about them." Defendant (ECF in No. the 19, at 14). state As court the complaint clear, filed by

Florida

makes

however,

Defendant is just as likely to be in possession of relevant records, and relevant witnesses are just as likely to be located in Florida. this point, (ECF No. 12, Attach. 4, at ¶¶ 8-14). Plaintiff concedes that "[i]t is Aside from no more

inconvenient for [Defendant's] Florida witnesses to travel to Maryland than for [Plaintiff's] Maryland witnesses to travel to Florida." (ECF No. 19, at 14). Because this factor does not

constitute an "exceptional circumstance" justifying abstention, it weighs in favor of this court retaining its jurisdiction. The third factor, however, weighs heavily in favor of

abstention.

"Piecemeal

litigation

occurs

when

different

tribunals consider the same issue, thereby duplicating efforts and possibly reaching different results." Gannett Co., 286 F.3d

at 744 (quoting American Int'l Underwriters, Inc. v. Continental Ins. Co., 843 F.2d 1253, 1258 (9th Cir. 1988)); see also Moses H. Cone Mem. Hosp. v. Mercury Const. Corp., 460 U.S. 1, 19 (1983) (noting that this was "[b]y far the most important factor" in Colorado River). "[F]or abstention to be appropriate, retention

of jurisdiction must create the possibility of inefficiencies 14

and

inconsistent

results

beyond

those

inherent

in

parallel

litigation, or the litigation must be particularly ill[-]suited for resolution in duplicate forums." 744. Gannett Co., 286 F.3d at

Here, there can be no doubt that the issues raised in both

proceedings are virtually identical and that the efforts of both courts are very likely to overlap. See Automated Systems, 176

F.Supp.2d at 463 ("The present suit is . . . not merely another piece of the litigation; it is essentially the same piece that the parties are contesting in the state proceedings."). In

fact, the parallel litigation is likely to raise "serious res judicata problems for either this court or the [state] court, depending dispute." on which court first Inc. reaches v. the merits of the 341

Baseline

Sports,

Third

Base

Sports,

F.Supp.2d 605, 610-11 (E.D.Va. 2004) (citing Beck v. CKD Praha Holding, A.S., 999 F.Supp. 652, 657 (D.Md. 1998)); see also

Covance, 338 F.Supp.2d at 617 ("if the issue of the restrictive covenant was actually litigated in the state action, then the present claim would . . . be precluded by res judicata"); Poston v. John Bell Co., Inc., Civ. No. 5:07-cv-00757, 2008 WL 4066254, at *6 (S.D.W.Va. Aug. 27, 2008) ("denial of Defendants' motion in its entirety will result in two separate lawsuits over

essentially the same issues"). supports abstention in this case.

Thus, the third factor strongly

15

The fourth factor, like the second, does not constitute an "exceptional circumstance" militating in favor of abstention. Although the state court proceeding was commenced several days prior to the instant case, that fact alone is insignificant. See Moses H. Cone, 460 U.S. at 21 ("priority should not be measured exclusively by which complaint was filed first, but rather in terms of how much progress has been made in the two actions"). while a Discovery has not yet commenced in either case, and dispositive motion to dismiss has been

potentially

pending in the state case for approximately four months, there is nothing in the record suggesting that the proceedings in state court have advanced significantly further than in this case. See Poston, 2008 WL 4066254, at *5 (finding this factor

did "not weigh in favor of abstention" where the state court action had "not advanced much further" than the federal case); cf. Baseline Sports, 341 F.Supp.2d at 610 (holding that this factor weighed "slightly in favor of abstention" where discovery had proceeded in the state court action, but not in the federal case). The fifth factor, relating to the presence of a federal question, is neutral in this case. federal question would strongly While "[t]he presence of a encourage the court not to

abstain, . . . the mere absence of a federal question does not bear any weight." Baseline Sports, 341 F.Supp.2d at 611; see 16

also Moses H. Cone, 460 U.S. at 26 ("the presence of federal law issues must always be a major consideration weighing against [abstention]"). Where, as here, state law is implicated in a

breach of contract action, that fact alone "do[es] not weigh in favor of abstention, particularly since both parties may find an adequate remedy in either state or federal court." Gannett Co.,

286 F.3d at 747 (quoting Gordon v. Luksch, 887 F.2d 496, 498 (4th Cir. 1989)). Thus, all that may be said of this factor is that

it does not disfavor abstention. The sixth factor, i.e., the adequacy of the state In

proceedings to protect the parties' rights, is also neutral.

assessing this factor, a district court must determine whether "the `parallel state-court litigation will be an adequate

vehicle for the complete and prompt resolution of the issues between the parties." Poston, 2008 WL 4066254, at *7 (quoting

Goldentree Asset Mgmt., L.P. v. Longaberger Co., 448 F.Supp.2d 589, 595 (S.D.N.Y. 2006) (quoting Moses H. Cone, 460 U.S. at 28)). It appears that Plaintiff could assert its claims in the

Florida state court action and that the state court is fully capable of providing relief to either party. Accordingly, the

state court is an adequate forum to resolve this matter, and this factor does not weigh in favor of abstention. On balance, the court is satisfied that this case presents "exceptional circumstances" warranting 17 its abstention pending

resolution of the Florida state court matter.

While two factors

slightly favor this court retaining jurisdiction and two others are neutral, the critical third factor strongly militates in favor of abstention. Accordingly, Defendant's motion to stay

will be granted, and its alternative motion to transfer venue will be denied as moot. IV. Conclusion For the foregoing reasons, Defendant's motion for a more definite statement will be denied and its motion to stay will be granted. A separate order will follow.

________/s/_________________ DEBORAH K. CHASANOW United States District Judge

18