In Re: RFC and RESCAP Liquidating Trust Litigation
Filing
569
ORDER denying #310 Motion to Dismiss filed by Defendants CMG Mortgage, Inc. and Home Loan Center, Inc.(Written Opinion). Signed by Judge Susan Richard Nelson on 06/25/15. (MJC)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
In Re: RFC and RESCAP Liquidating
Trust Actions
__________________________________
Civil File No. 13-3451 (SRN/JJK/HB)
This document relates to:
MEMORANDUM OPINION
AND ORDER
ResCap Liquidating Trust v. CMG
Mortgage, Inc., No. 14-CV-3522 (ADM)
Residential Funding Company, LLC v.
Home Loan Center, Inc., No. 14-CV-1716
(DWF/JJK)
SUSAN RICHARD NELSON
Before the Court is the Joint Motion to Dismiss Plaintiffs’ First Amended
Complaints filed by Defendants CMG Mortgage, Inc. (“CMG”) and Home Loan Center,
Inc. (“HLC”) [Doc. No. 310]. Plaintiffs ResCap Liquidating Trust and Residential
Funding Company, LLC (collectively, “RFC”) filed an opposition memorandum [Doc. No.
379], to which Defendants replied [Doc. No. 428]. The Court has considered this matter
on the papers. For the reasons set forth below, Defendants’ motion is denied.
I.
BACKGROUND
The lawsuits in this consolidated action arise out of Defendants’ sale of allegedly
defective mortgage loans to RFC. Plaintiffs assert breach of contract and indemnification
claims, seeking to recover damages based on Plaintiffs’ Chapter 11 bankruptcy losses and
liabilities that Plaintiffs allege were caused by Defendants. (See First. Am. Compl. ¶¶ 841
95, ResCap Liquidating Trust v. CMG Mortg., Inc., No. 14-CV-3522 (SRN/JJK/HB)
(“CMG FAC “) [Doc. No. 47]; First Am. Compl. ¶¶ 78-89, Residential Funding Co., LLC
v. Home Loan Center, 14-CV-1716 (DWF/JJK) [Doc. No. 1-2] (“HLC FAC”).)
In their joint motion, CMG and HLC argue that RFC’s breach of contract claims
against them must be dismissed because Plaintiffs fail to allege that a contract was formed
and accepted. (Defs.’ Mem. at 8-13 [Doc. No. 312].) In the complaints in question,
Plaintiffs allege that “RFC and Defendant [CMG] [HLC] entered into a valid and
enforceable Agreement pursuant to which RFC acquired . . . [a specific amount of ]
mortgage loans from [CMG] [HLC].” (CMG FAC ¶ 85 [Doc. No. 47], ResCap
Liquidating Trust v. CMG Mortg., Inc., No. 14-CV-3522 (SRN/JJK/HB); HLC FAC ¶ 79
[Doc. No. 1-2], Residential Funding Co., LLC v. Home Loan Center, 14-CV-1716
(DWF/JJK).) Defendants CMG and HLC contend that their respective contracts included
a provision requiring a certified resolution from the respective boards of directors of CMG
and HLC authorizing the contracts’ execution and delivery, along with the executed
contracts themselves. (Defs.’ Mem. at 5-8 [Doc. No. 312].) Defendants argue that
Plaintiffs fail to allege facts showing how the contracts were accepted and executed,
particularly with respect to the board resolution requirement. (Id. at 6-8.) Thus, because
the complaints lack such allegations, CMG and HLC argue that the Court cannot infer that
valid contracts were formed or that Defendants breached the contracts. (Id. at 8-13.)
Likewise, because Plaintiff’s indemnification claim is premised upon the existence of a
valid express contract, CMG and HLC contend that this claim also fails. (Id. at 13-14.)
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Plaintiffs oppose Defendants’ motion, arguing that they have adequately pleaded
the existence of valid contracts between the parties. (Pls.’ Opp’n Mem. at 1-2 [Doc. No.
379].) Moreover, Plaintiffs assert that Defendants’ motion is effectively moot, as
Plaintiffs submit with their opposition memorandum the board resolutions in question.
(Id.; Horst Decl. Exs. A-H [Doc. No. 380]: CMG 2000 Corp. Resolution, CMG 2006
Corp. Resolution, HLC 2002 Corp. Resolutions, HLC 2003 Corp. Resolution; HLC 2005
Corp. Resolutions.)
II.
DISCUSSION
A.
Standard of Review
When evaluating a motion to dismiss under Rule 12(b)(6) of the Federal Rules of
Civil Procedure, for failure to state a claim upon which relief can be granted, the Court
assumes the facts in the Complaint to be true and construes all reasonable inferences from
those facts in the light most favorable to the plaintiff. Morton v. Becker, 793 F.2d 185,
187 (8th Cir. 1986). However, the Court need not accept as true wholly conclusory
allegations, see Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th Cir.
1999), or legal conclusions the plaintiff draws from the facts pleaded, Westcott v. City of
Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). In addition, the Court ordinarily does not
consider matters outside the pleadings on a motion to dismiss. See Fed. R. Civ. P. 12(d).
The Court may, however, consider exhibits attached to the complaint and documents that
are necessarily embraced by the pleadings, Mattes v. ABC Plastics, Inc., 323 F.3d 695,
697 n.4 (8th Cir. 2003), and may also consider public records, Levy v. Ohl, 477 F.3d 988,
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991 (8th Cir. 2007). In cases involving contracts, courts may examine the contract
documents in deciding a motion to dismiss. Stahl v. United States Dep’t of Agric., 327
F.3d 697, 700 (8th Cir.2003).
Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a complaint “must
contain . . . a short and plain statement of the claim showing that the pleader is entitled to
relief.” The Supreme Court, in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic
Corp. v. Twombly, 550 U.S. 544 (2007), clarified that this Rule does not require that a
complaint contain “detailed factual allegations,” but it does require that it contain facts
with enough specificity “to raise a right to relief above the speculative level.” Twombly,
550 U.S. at 555. In other words, this standard “calls for enough fact[s] to raise a
reasonable expectation that discovery will reveal evidence of [the claim].” Id. at 556.
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555).
Thus, to survive a motion to dismiss, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570.
B.
Breach of Contract
To prevail on a claim for breach of contract, a plaintiff must prove the following:
(1) the formation of a contract; (2) the performance by plaintiff of any conditions
precedent; and (3) a material breach of the contract by defendant. Commercial Assocs.,
Inc. v. Work Connection, Inc., 712 N.W.2d 772, 782 (Minn. Ct. App. 2006) (citation
omitted). Some Minnesota cases also require the element of damages. Parkhil v. Minn.
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Mut. Life Ins. Co., 174 F.Supp.2d 951, 961 (D. Minn. 2000).
To survive a motion to dismiss a breach of contract claim, a plaintiff need not prove
each of the elements of the claim, nor must a plaintiff provide evidence supporting the
claim. Chambers v. Travelers Cos., Inc., No. 08-CV-5947 (JMR/JJK), 2009 WL 873124,
at *5 (D. Minn. Mar. 30, 2009) (denying a motion to dismiss on breach of contract claim
where plaintiff had alleged a right to receive a bonus, without alleging the amount of the
bonus or the specific provision which gave her the right to a bonus). Rather, a plaintiff’s
allegations are taken as true, and all reasonable inferences are drawn in the plaintiff’s
favor. Morton, 793 F.2d at 187. At this very early stage, the question is whether Plaintiffs
have adequately alleged a set of plausible facts entitling them to relief for breach of
contract and indemnification. While Defendants cite Industrial Rubber Applicators, Inc. v.
Eaton Metal Prods. Co., 171 N.W.2d 728, 731 (Minn. 1969), rev’d on other grounds, for
the proposition that a plaintiff must allege that a contract was “formed,” the court there
noted what a plaintiff must prove in order to establish a right of recovery on a breach of
contract claim, as opposed to what a plaintiff must simply allege in a complaint. Here,
Plaintiffs allege that: (1) a valid, duly authorized contract existed with respect to both
CMG and HLC; (2) Defendants breached the terms of the contracts; and (3) Plaintiffs
sustained damages as a result. (CMG FAC ¶¶ 17-18, 85 [Doc. No. 47], ResCap
Liquidating Trust v. CMG Mortg., Inc., No. 14-CV-3522 (SRN/JJK/HB); HLC FAC ¶¶
17-18, 79 [Doc. No. 1-2], Residential Funding Co., LLC v. Home Loan Center, 14-CV1716 (DWF/JJK).) In addition to the allegations that the contracts were “entered into,”
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Plaintiffs attached copies of the contracts to the respective complaints in question: the
2000 CMG Contract states that it was executed by CMG’s duly authorized officers as of
the date of the Contract (CMG FAC, Ex. A at 11 [Doc. No. 47-1], ResCap Liquidating
Trust v. CMG Mortg., Inc., No. 14-CV-3522 (SRN/JJK/HB); see also CMG 2008
Contract, Ex. A at 17 [Doc. No. 47-1]), and the 2002 HLC Contract likewise states that it
was executed by HLC’s duly authorized officers as of the date of the Contract. (HLC
FAC, Ex. A at 32 [Doc. No. 1-2], Residential Funding Co., LLC v. Home Loan Center,
14-CV-1716 (DWF/JJK).) The Court therefore finds that Plaintiffs have sufficiently
alleged a claim for breach of contract. Defendant’s motion to dismiss this claim is
accordingly denied.1
Because Defendants’ motion to dismiss Plaintiffs’ indemnification claim is
conditioned on the successful dismissal of the breach of contract claim, the dismissal of
the indemnification claim is also denied.
Finally, because the Court finds that Plaintiffs’ claims meet the pleading
requirements of Rule 12(b)(6), it need not consider the CMG and HLC board resolution
documents proffered by Plaintiffs in opposition to Defendants’ motion.
THEREFORE IT IS HEREBY ORDERED THAT:
The Joint Motion to Dismiss Plaintiffs’ First Amended Complaints filed by
1
Moreover, Plaintiffs argue that the delivery of board resolutions was not required
for “formation” of the contracts, as such delivery was merely promised as evidence of the
signatories’ signing authority, along with execution of the contracts. (Pls.’ Opp’n Mem.
at 5 [Doc. No. 379].)
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Defendants CMG Mortgage, Inc. and Home Loan Center, Inc. [Doc. No. 310] is
DENIED.
Dated: June 25, 2015
s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge
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