Beal Bank Nevada v. The Business Bank of St. Louis
Filing
49
MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that the motion of plaintiff Beal Bank USA for summary judgment (Doc. 29) is sustained in part and otherwise denied. IT IS FURTHER ORDERED that a non-jury trial of this action is set for Wednesday, September 12, 2012, at 9:00 a.m. ( Bench Trial set for 9/12/2012 09:00 AM in Courtroom 17N before Magistrate Judge David D. Noce.) Signed by Magistrate Judge David D. Noce on 6/13/2012. (KMS)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
BEAL BANK USA,
Plaintiff,
v.
THE BUSINESS BANK OF ST. LOUIS,
Defendant.
)
)
)
)
)
)
)
)
)
No. 4:11 CV 561 DDN
MEMORANDUM AND ORDER
This action is before the court on the motion of plaintiff Beal Bank
1
USA (Beal Bank) for summary judgment against defendant The Business Bank
of St. Louis (BBSL).
22, 2012.
(Doc. 29.)
Oral arguments were heard on February
For the reasons set forth below, the court grants partial
summary judgment to Beal Bank and sets the action for a non-jury trial.
I.
BACKGROUND
Beal Bank’s claims
Beal Bank commenced this judicial action against BBSL, generally
invoking for all of its claims the court’s diversity of citizenship
subject matter jurisdiction granted by 28 U.S.C. § 1332.2
Beal Bank
alleges that the Federal Deposit Insurance Corporation (FDIC), as the
receiver of failed bank Champion Bank, transferred to Beal Bank an
interest in certain loan repayment proceeds, which were an asset of
Champion
Bank,
(Champion
Bank
participation)
and
that
BBSL,
the
contractual promisor, has not paid to Beal Bank all the proceeds due it
under a Participation Agreement to which Champion Bank had been a party.
1
After this action was commenced, plaintiff changed its name from
“Beal Bank Nevada” to “Beal Bank USA”.
(Doc. 28.)
The case shall
continue with plaintiff thus renamed.
2
Beal Bank alleges for itself corporate citizenship in Nevada, that
BBSL is a Missouri banking corporation, and that the amount in
controversy exceeds $75,000. (Doc. 1 at ¶¶ 2-4.) These jurisdictional
facts are not disputed. The court has subject matter jurisdiction over
this action under 28 U.S.C. § 1332.
In Count I, Beal Bank seeks a declaratory judgment that the FDIC had
the authority to sell or assign to it, and that it acquired, the Champion
Bank participation and that this transaction was valid.
In Count II, Beal Bank seeks a declaratory judgment that (a) any
claim asserted by BBSL arises from the FDIC assignment of the Champion
Bank
participation
to
Beal
Bank
and
relates
to
the
independent,
intervening acts or omissions of the FDIC; (b) any such claim by BBSL is
cognizable, if at all, solely against the FDIC; (c) BBSL is required to
pursue any such claims through the exclusive claims process provided by
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989,
Pub. L. No. 101-73, 103 Stat. 183 (1989) (FIRREA);3 (d) BBSL has failed
to invoke, pursue, and exhaust these processes; (e) absent BBSL’s
compliance with the procedures required by FIRREA, BBSL’s claims are
jurisdictionally barred by 12 U.S.C. § 1821(d)(13)(D); and (f) any such
claim cannot be used as a basis to deny payments to Beal Bank under the
Participation Agreement.
In Count III, Beal Bank seeks a declaratory judgment that BBSL has
no claim against it related to any alleged violation of the Participation
Agreement that occurred before the transaction date.
In Count IV, Beal Bank seeks an order (a) directing BBSL to perform
its duties under the Participation Agreement and to make payments to Beal
Bank when due;4 and (b) directing BBSL to account to Beal Bank for all
amounts due under the Participation Agreement.
Finally, in Count V, Beal Bank seeks an award of attorneys’ fees and
costs.
BBSL’s answer and counterclaims
In its answer and affirmative defenses, BBSL denies that Beal Bank
is entitled to any of the relief it seeks, claims that Beal Bank is not
3
FIRREA is “codified in scattered sections of Title 12" of the
United States Code. Loumiet v. Office of Comptroller of Currency, 650
F.3d 796, 798 (D.C. Cir. 2011).
4
As stated below, BBSL asserts it has remitted to Beal Bank
substantial monies on account of the Participation Agreement.
- 2 -
a valid party to the Participation Agreement, and asserts that BBSL has
performed all of its obligations under the Participation Agreement and
has at all times acted in good faith.
In its Count I counterclaim, BBSL alleged that Beal Bank, under the
terms of the FDIC assignment to it of the Champion Bank participation,
assumed liability for the FDIC’s failure to comply with the right-offirst-refusal provision in the Participation Agreement.
BBSL sought
monetary damages in excess of $75,000.00 for damages caused by this
breach, as well as incidental damages, prejudgment interest, attorneys’
fees, and litigation costs.
In its Count II counterclaim, BBSL sought (a) an order from this
court
directing
Beal
Bank
to
disclose
the
price
it
paid
for
the
assignment of the Champion Bank participation; (b) rescission of the FDIC
assignment and an order that BBSL be given the option to repurchase the
Champion Bank participation; and (c) an award of costs, expenses, and
attorneys’ fees.
On August 8, 2011, the court sustained Beal Bank’s motion to dismiss
BBSL’s counterclaims for lack of subject matter jurisdiction and because
BBSL failed to join the FDIC as a necessary party to its counterclaims.
The court held that BBSL failed to exhaust its administrative remedies
against the FDIC under FIRREA and thus FIRREA’s jurisdictional bar
precluded subject matter jurisdiction.
(Doc. 27); Beal Bank Nevada v.
The Business Bank of St. Louis, No. 4:11 CV 561 DDN, 2011 WL 3444241
(E.D. Mo. Aug. 8, 2011).
The court also held that, without having the FDIC present in this
case, there was not then in the record a sufficient basis for deciding
whether the FDIC repudiated BBSL’s right of first refusal.
This ruling
was consistent with a similar decision by a judge of this court in Bank
of Commerce v. Business Bank of St. Louis, No. 4:11 CV 428 JCH.
Now before the court is the motion of Beal Bank for summary
judgment.
(Doc. 29.)
II. MOTION FOR SUMMARY JUDGMENT
Summary judgment must be granted when the pleadings and proffer of
evidence demonstrate that no genuine issue of material fact exists and
- 3 -
the moving party is entitled to judgment as a matter of law.
Fed. R.
Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986);
Ashanti v. City of Golden Valley, 666 F.3d 1148, 1150 (8th Cir. 2012).
The court must view the evidence in the light most favorable to the
nonmoving party and accord it the benefit of all reasonable inferences.
Ashanti, 666 F.3d at 1150.
A fact is “material” if it could affect the
ultimate disposition of the case, and a factual dispute is “genuine” if
there is substantial evidence to support a reasonable jury verdict in
favor of the non-moving party.
Die-Cutting Diversified, Inc. v. United
Nat’l Ins. Co., 353 F. Supp. 2d 1053, 1054-55 (E.D. Mo. 2004).
Initially, the moving party must demonstrate the absence of an issue
for trial.
Celotex, 477 U.S. at 323.
Once a motion is properly made and
supported, the nonmoving party may not rest upon the allegations in its
pleadings but must instead proffer admissible evidence that demonstrates
a genuine issue of material fact.
Fed. R. Civ. P. 56(e); Crawford v. Van
Buren Cnty., Ark., ___ F.3d ___, 2012 WL 1813423, at *3 (8th Cir. 2012).
Even if all of the relief sought by the movant is not granted, the court
may make findings of undisputed facts that will guide the court in the
further disposition of the case.
See Fed. R. Civ. P. 56(g).
The relevant undisputed facts
The following facts are undisputed although the parties dispute
their legal effect:
1.
On or before September 6, 2007, The Business Bank of St. Louis
(BBSL) loaned to Matthew J. and Toni Ratteree $4.9 million.
Under the
loan agreement, the Ratterees were obligated to make periodic payments
to BBSL.
2.
Effective September 6, 2007, BBSL entered into a Participation
Agreement with Champion Bank,5 whereby BBSL sold to Champion Bank an
5
The preamble paragraph of the Participation Agreement describes
BBSL as the “Originating Bank” and Champion Bank as the “Participating
Bank.” Nowhere else in the Participation Agreement are BBSL and Champion
Bank referred to other than as “Originating Bank” and “Participating
Bank,” respectively. (Doc. 1-1.)
- 4 -
undivided 82% interest (Champion Bank participation) in the Ratteree
loan.
3.
The Participation Agreement provides in relevant part as
follows:
2. Payments.
Any payments made on the Loan, and any
proceeds of any collateral for the Loan, shall be divided
between Originating Bank and Participating Bank as set out in
Exhibit A. Originating Bank shall receive all payments of
principal, interest, default penalties, collateral proceeds
and other amounts payable on the Loan. All payments shall be
first applied to advances of principal, then to accrued
interest, and then to repayment of advances made to pay fees
and expenses. Originating Bank shall, within ten (10) business
days after receipt of each payment, report and remit, by wire
transfer or as otherwise directed by Participating Bank, the
portion of such payment to which Participating Bank is
entitled. If there are not sufficient funds to repay
Participating Bank’s interest in full, Participating Bank
shall have no claim against Originating Bank for any remaining
balance.
* * *
11. Assignability; Right to Repurchase. Without the prior
written consent of Originating Bank, Participating Bank may
not assign its obligation to fund disbursements or
expenditures in connection with the Loan or sell, pledge or
otherwise transfer its Participation in the Loan without first
offering to Originating Bank the right to repurchase the
Participation. Originating Bank shall have no obligation to
repurchase the Participation under any circumstances.
Participating Bank shall provide to Originating Bank a written
agreement from a third party to purchase the Participation,
and Originating Bank shall have fifteen (15) days from the
receipt of such agreement to notify Participating Bank that
Originating Bank will repurchase the Participation on the same
terms set out in such agreement. Participating Bank shall have
the right, if Originating Bank does not notify Participating
Bank that it is exercising its right to repurchase the
Participation within such fifteen (15) day period, to assign
or transfer the Participation to such third party.
* * *
14. Attorney’s Fees and Costs. Each party to this Agreement
shall pay its own attorneys’ fees incurred in connection with
the negotiation and execution of this Agreement. If any
lawsuit or proceeding is brought by either party to enforce
the terms of this Agreement, the unsuccessful party agrees to
pay the prevailing party’s court costs and reasonable
attorneys’ fees incurred in bringing or defending such action.
- 5 -
* * *
17. Governing Law. This Participation Agreement is executed
under and shall be governed and construed in accordance with
the laws of the State of Missouri, and the parties hereto
submit to jurisdiction of the courts of Missouri.
(Doc. 1-1 at 1-5.)
4.
Exhibit A to the Participation Agreement states, “Payments on
the Loan (including accrued interest and contributions to fees and
expenses) shall be distributed pro rata between Originating Bank and
Participating Bank.”
5.
(Doc. 1-1 at 6.)
On April 30, 2010, the Missouri Division of Finance closed
Champion Bank and appointed the Federal Deposit Insurance Corporation
(FDIC) as Receiver for Champion Bank’s assets, which included the
Champion Bank participation in the Ratteree loan repayment proceeds.
6.
On May 20, 2010, BBSL offered to repurchase the Champion Bank
Champion Bank participation from the FDIC for approximately 50% of its
then-outstanding balance.
7.
By a letter dated September 22, 2010, the FDIC rejected BBSL’s
offer, but encouraged BBSL to “make an additional offer that more closely
resemble[d] the value of the Participation Interest.”
8.
(Doc. 1-3.)
Thereafter, the FDIC undertook to sell the Champion Bank
participation through a bidding process and made BBSL aware of this.
BBSL objected to the FDIC regarding the sale of the Champion Bank
participation on at least three occasions: (1) by letter dated September
27, 2010; (2) by letter dated October 15, 2010; and (3) in a phone
conversation on October 12, 2010.
9.
document
On December 3, 2010, the FDIC and Beal Bank executed a
captioned,
“Assignment
and
Assumption
of
Interests
and
Obligations” (the Assignment document), under which the FDIC transferred
all
of
the
rights,
title,
and
interests
in
the
Champion
Bank
participation to Beal Bank, with Beal Bank assuming “all obligations
arising from and after the date [t]hereof.” The relevant language of the
Assignment document states:
THIS ASSIGNMENT AND ASSUMPTION OF INTERESTS AND
OBLIGATIONS (“Assignment”) is made and entered into as of the
- 6 -
3rd day of December, 2010, by and between the Federal Deposit
Insurance Corporation , as Receiver for Champion Bank, Creve
Coeur, Missouri, (“Assignor”), and BEAL BANK NEVADA, a Nevada
thrift organized and existing under the law of Nevada
(“Assignee”).
Whereas, Assignor and Assignee have entered into that
certain Loan Sale Agreement dated as of December 3, 2010 (the
“LSA”), pursuant to which Assignor has agreed to sell, assign,
transfer and convey to Assignee all the assets identified on
Exhibit A attached to this Agreement (the “Assets”).
* * *
Whereas, Assignee has agreed to accept and assume all of
Assignor’s duties, obligations and liabilities under the
Agreements to Pay, Collateral Documents, Real Estate Interests
and Miscellaneous Agreements related to the Assets (the
“Obligations”).
* * *
NOW THEREFOR, in consideration of the foregoing and the
sum of ten dollars ($10.00), and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor and Assignee hereby agree as follows:
1.
Assignor’s Assignment. Assignor hereby transfers
. . . to Assignee all of the Assignor’s right, title and
interest in the Agreements to Pay, the Collateral Documents,
the Real Estate Interests and the Miscellaneous Agreements.
2.
Assignee’s Acceptance. Assignee does hereby accept
such assignment from Assignor and assumes all Obligations
arising from and after the date hereof.
The Obligations
assumed include, without limitation, any and all obligations
to (i) make payments relating to Agreements to Pay serviced by
Assignor; (ii) make Advances with respect to Agreements to Pay
serviced by Assignor; (iii) reimburse third party servicers
for Advances on Agreements to Pay, and (iv) make incremental
disbursements of loan proceeds, such as in the case of a
revolving credit loan or a construction loan.
* * *
7.
Controlling Law. Federal law of the United States
shall control this Agreement. To the extent that federal law
does not supply a rule of decision, this Agreement shall be
governed by, and construed and enforced in accordance with,
the laws of the State of New York. Nothing in this Agreement
will require any unlawful action or inaction by either party.
- 7 -
(Doc. 1-4 at 1-3.)
10.
After December 3, 2010, BBSL received payments from the
borrower on the Ratteree Loan.6
11.
On January 11, 2011, the FDIC sent a letter to BBSL advising
it of the transfer of the Champion Bank participation to Beal Bank.
12.
After BBSL received the FDIC letter giving it notice of the
transfer, Beal Bank instructed BBSL to send all payments due it under the
Participation Agreement to CLMG Corp., Beal Bank’s servicer.
13.
challenges
By letter dated January 17, 2011, BBSL advised CLMG of its
to
participation.
the
purported
assignment
of
the
Champion
Bank
BBSL argued that the FDIC’s repudiation of its right of
first refusal requires the payment of damages for tortious interference
with BBSL’s state law contractual rights in the Participation Agreement.
14.
BBSL also made these complaints to the FDIC directly.
In
response, the FDIC advised BBSL on at least two occasions that BBSL had
the right to file an administrative claim against it as receiver for any
damages that BBSL believed the FDIC had caused it.
BBSL has not filed
any such administrative claim or joined the FDIC as a party to this
action.
DISCUSSION
Plaintiff Beal Bank invokes the court’s diversity of citizenship
subject matter jurisdiction, granted by 28 U.S.C. § 1332. In a diversity
action such as this, the court must apply the choice of law rules that
would be applied by the state courts of Missouri, the forum state.
28
U.S.C. § 1652; e.g., John T. Jones Const. Co. v. Hoot Gen. Const. Co.,
Inc., 613 F.3d 778, 782 (8th Cir. 2010).
Beal Bank’s claims against BBSL
for failure to pay to it proceeds from the Champion Bank participation
in the Participation Agreement sound in breach of contract.
Under the
law of Missouri, contracting parties are bound by their selection of the
applicable substantive law for resolving a future disputes.
6
State ex
Beal Bank and BBSL dispute whether BBSL has remitted to Beal Bank
all of the Champion Bank participation proceeds it received.
It is
undisputed that BBSL has remitted at least some of these proceeds to Beal
Bank.
- 8 -
rel. McKeage v. Cordonnier, 357 S.W.3d 597, 600 (Mo. banc 2012).
The
court thus applies Missouri law as the rules of decision.
In its motion for summary judgment, Beal Bank seeks the following
relief:
(a)
a declaration that the FDIC’s December 3, 2010 assignment of the
Champion Bank participation to Beal Bank was valid;
(b)
a declaration that Beal Bank is the “Participating Bank” in the
Participation Agreement;
(c)
judgment against BBSL for (i) the amount of any unpaid participation
monies to which Beal Bank is entitled under the Participation
Agreement, and (ii) prejudgment interest;
(d)
an order to BBSL that it make all monthly payments to Beal Bank that
are required by the Participation Agreement in the future; and
(e)
reasonable attorneys’ fees, costs, and expenses.
(a): Validity of the FDIC Assignment
In dismissing BBSL’s counterclaims earlier in this suit, the court
determined
that
FIRREA
barred
the
court
from
considering
BBSL’s
allegations that the FDIC assignment of the Champion Bank participation
to Beal Bank was in violation of BBSL’s contractual right of first
refusal, because BBSL had not pursued its statutory administrative
remedies before the FDIC.
This failure deprived the court of subject
matter jurisdiction over BBSL’s counterclaims.7
Beal Bank, 2011 WL
3444241, at *4-5; e.g., Benson v. JPMorgan Chase Bank, N.A., 673 F.3d
1207,
1209
(9th
Cir.
2012)
(“Litigants
cannot
avoid
FIRREA’s
administrative requirements through strategic pleading.”); Am. Nat’l Ins.
7
See 12 U.S.C. § 1821(d)(13)(D)(ii), which provides:
Except as otherwise provided in this subsection, no court
shall have jurisdiction over–* * *
(ii) any claim relating to any act or omission of such
institution or the [FDIC] as receiver.
12 U.S.C. § 1821(d)(13)(D)(ii).
- 9 -
Co. v. FDIC, 642 F.3d 1137, 1144 (D.C. Cir. 2011) (explaining that a
claim which is “functionally a claim against the FDIC-as-receiver” is
subject to FIRREA’s administrative exhaustion requirement (discussing
Village of Oakwood v. State Bank & Trust Co., 539 F.3d 373, 386 (6th Cir.
2008)); Stonearch Fund IV, LLC v. Beal Bank USA, Civ. Nos. 11-3187
(PAM/FLN), 11-3320 (PAM/FLN), 2012 WL 1648904, at *3 (D. Minn. May 2,
2012) (holding that claims in “a nearly identical case” were barred by
§ 1821(d)(13)(D)(ii)). The court also determined that the absence of the
FDIC as a party in the action deprived the court of a necessary party
because BBSL’s counterclaims would have required the court to evaluate
the FDIC’s actions and if successful, would have exposed the FDIC to
potential liability.
Beal Bank, 2011 WL 3444241, at *7-8; e.g., Bank of
Commerce, No. 4:11 CV 428 JCH (Doc. 21) (holding that the FDIC’s presence
in the case was necessary in order to accord complete relief and to
“determine, among other things, whether the FDIC effectively repudiated
the Participation Agreement under FIRREA”).
In its memorandum opposing summary judgment, BBSL does not contest
that Beal Bank is entitled to payments from the Champion interest in
accordance with the terms of the Participation Agreement. On this basis,
BBSL argues that the validity of the FDIC assignment is not presently at
issue and that Beal Bank’s claims are now moot.
(Doc. 33.)
The court agrees that the validity of the FDIC assignment is no
longer contested and thus not properly before the court for adjudication.
BBSL concedes that Beal Bank is the “Participating Bank” under the
Participation Agreement and is thus entitled to payments owed under the
Participation Agreement; BBSL has made at least some of these payments
to Beal Bank.
(Docs. 33, 48.)
Thus, no controversy now exists between
the parties concerning the FDIC assignment or that Beal Bank is the
“Participating Bank” under the Participation Agreement.
E.g., Bank of
Commerce, 2011 WL 463529, at *4 (explaining under similar circumstances
that “the question of whether the FDIC rightfully and legally transferred
the Participation Agreement without first allowing [BBSL] its right of
first refusal [was] not before the Court” because BBSL had “implicitly
conceded the validity of the transfer”).
Issuance of a declaratory
judgment is not a proper remedy under these circumstances.
- 10 -
See Golden
v. Zwickler, 394 U.S. 103, 108 (1969) (holding that there must be a real
and immediate controversy between the parties for a declaratory judgment
to be proper).
Moreover, a declaration by the court regarding the FDIC assignment
of the Champion Bank participation would require speculation by the court
as to what statutory authority the FDIC invoked in assigning the Champion
Bank
participation
to
Beal
Bank.
Compare,
e.g.,
§
1821(e)(1)
(authorizing the FDIC to repudiate contracts “the performance of which
[the FDIC] determines to be burdensome” when repudiation would “promote
the orderly administration of the [insured depository] institution’s
affairs”) with § 1821(d)(2)(G)(i)(II) (authorizing the FDIC to “transfer
any asset or liability of the [insured depository] institution in default
. . . without any approval, assignment, or consent”).
A determination
by the court in this regard could also expose the FDIC to potential
liability,
a
counterclaims.
fact
relied
upon
by
the
court
in
dismissing
BBSL’s
Beal Bank, 2011 WL 3444241, at *8; cf. Sahni v. Am.
Diversified Partners, 83 F.3d 1054, 1057 (9th Cir. 1996) (explaining that
rescission would not be an appropriate remedy because it could expose the
FDIC to liability).
Nor is a declaratory judgment concerning the FDIC assignment
required before the court can award damages to Beal Bank for payments
owed under the Participation Agreement. See, e.g., Bank of Commerce, No.
4:11 CV 428 JCH, 2011 WL 4635929, at *4 (E.D. Mo. Oct. 6, 2011) (granting
summary
judgment
that
the
Participation
Agreement
was
valid
and
enforceable where a declaration regarding the validity of the Assignment
was not sought); Stonearch, 2012 WL 1648904, at *6 (explaining that
relief for a breach of the Participation Agreement was available because
such relief “[did] not involve allegations regarding the FDIC”).
As
discussed below, the undisputed facts show that BBSL may have breached
the Participation Agreement; a declaratory judgment regarding the FDIC
assignment is not necessary to resolve the actual conflict between the
parties, namely, whether BBSL improperly refused to remit payments on the
Champion Bank participation to Beal Bank.
See Dominium Mgmt. Servs.,
Inc. v. Nationwide Hous. Group, 195 F.3d 358, 367 (8th Cir. 1999)
(stating that the court should not issue a declaratory judgment where it
- 11 -
“would serve no useful purpose and would engender more uncertainty and
controversy than it would resolve”).
Therefore, to the extent issues concerning the FDIC assignment of
the Champion Bank participation to Beal Bank are not moot, the court
declines to issue a declaratory judgment as to these issues.
See
generally Gulf Underwriters Ins. Co. v. Burris, 674 F.3d 999, 1004 (8th
Cir. 2012) (explaining that “[r]elief under 28 U.S.C. § 2201, the Federal
Declaratory Judgment Act, is discretionary”).
(b), (c), and (d): Payment of Proceeds and Prejudgment Interest
Beal
Bank
also
seeks
a
declaratory
judgment
that
it
is
the
“Participating Bank” under the Participation Agreement, as well as
payment of all past, unpaid payments; prejudgment interest on those
payments; and an order directing BBSL to make all future payments owed
under the Participation Agreement.
BBSL argues that these issues are moot because in an attempt to
resolve this litigation, it has paid all that is owed to Beal Bank under
the Participation Agreement. (Docs. 33, 48.) The court agrees with BBSL
in some respects and disagrees in others.
In its response to Beal Bank’s motion for summary judgment, BBSL
asserted that it has complied with the terms of the Participation
Agreement by paying all amounts payable to Beal Bank as though the
Participation Agreement was valid. (Doc. 33 at 1-2.) However, BBSL then
argued that, in the event the court holds this dispute is not moot, Beal
Bank is not the “Participating Bank” under the Participation Agreement.
(Doc. 33 at 3-5.)
As discussed above, the court concludes that BBSL has conceded that
Beal Bank is the “Participating Bank” under the Participation Agreement.
E.g., Bank of Commerce, 2011 WL 4635929, at *4 (BBSL conceded that Bank
of Commerce was the “Participating Bank” under another Participation
Agreement assigned to Bank of Commerce by the FDIC-receiver).
Moreover,
any challenges to Beal Bank being the “Participating Bank” under the
Participation
Agreement
are
effectually
challenges
assignment, an issue not properly before the court.
- 12 -
to
the
FDIC
However,
the
factual
issue
of
complete
payment
vel
non
of
outstanding amounts owed under the Participation Agreement is before the
court.8
Beal Bank’s entitlement to any unpaid amount by BBSL from the
Ratteree loan proceeds is subject to a claim under Missouri law for
breach of the Participation Agreement brought by Beal Bank as a thirdparty creditor beneficiary of this agreement.
A third-party beneficiary is one who is not in privy to
a contract but may nonetheless pursue a cause of action for
breach of contract. The rights of a third-party beneficiary
depend on the terms of the contract itself. The beneficiary
need not be named in the contract, but the terms of the
agreement must clearly and directly express an intent to
benefit an identifiable person or class. A party claiming
rights as a third-party beneficiary has the burden of showing
that provisions in the contract were intended for his direct
benefit.
The contract rights are only enforceable if the
promisor assumed a direct obligation to the third-party
beneficiary.
* * *
A creditor beneficiary is
to confer the benefit of
contract with the promisor
or duty the promisee owes
one
the
and
the
upon whom the promisee intends
performance of the promisee’s
thereby discharge an obligation
beneficiary.
Kansas City Hispanic Ass’n Contractors Enter., Inc. v. City of Kansas
City, 279 S.W.3d 551, 555 (Mo. App. W.D. 2009) (internal citations
omitted).
The factual record is clear that, in the absence of a challenge to
the legal validity of the assignment transaction, BBSL obligated itself
in the Participation Agreement to pay the Champion Bank participation in
the Ratteree loan payments to whomever that interest was transferred
under the Participation Agreement.
There is no dispute and the court
concludes
identifiable
that
Beal
Bank
is
the
third-party
creditor
beneficiary of that interest by reason of the assignment to it by the
8
The court is not jurisdictionally barred, either by FIRREA or
Article III of the Constitution, from deciding whether and to what extent
BBSL is liable to Beal Bank for unpaid proceeds of the Champion Bank
participation because Beal Bank denies that BBSL had paid all that is
owed, including interest, from the Champion Bank participation in the
Ratteree loan proceeds. See n. 6.
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FDIC, as BBSL cannot challenge the FDIC assignment in this action at this
time.
Thus, Beal Bank may be entitled to judgment for unpaid proceeds
of the Champion Bank participation.9
As previously noted, the parties dispute whether BBSL has paid to
Beal Bank all the monies that it would be entitled to under the
Participation Agreement.
remains to be tried.
Therefore, the factual issue of full payment
Affected by this factual issue are Beal Bank’s
claims to prejudgment interest and other relief.
Therefore, Beal Bank is entitled to (b) a declaratory judgment that
it is the “Participating Bank” under the Participation Agreement, but is
not entitled to summary judgment concerning (c) future payments, or
(d) prejudgment interest.
(e): Attorneys’ fees, costs, and interest
Beal Bank argues that it is entitled to reasonable attorneys’ fees,
costs, and post-judgment interest under the Participation Agreement.
And, indeed, § 14 of the Participation Agreement, stated above, provides
for such relief to the party to that Agreement who prevails in a dispute
brought under the Agreement.
BBSL argues that because the court cannot declare that the FDIC
assignment of the Champion Bank participation to Beal Bank is valid, BBSL
cannot be liable for the relief sought under the Participation Agreement.
But,
as
discussed
above,
by
electing
not
to
pursue
its
statutory
administrative remedies against the FDIC and by not joining the FDIC as
a party in this action, BBSL has waived its right to challenge the
validity of the FDIC assignment. Thus, BBSL’s arguments do not undermine
Beal Bank’s claim to attorneys’ fees under the Participation Agreement.
9
If BBSL is wronged by the FDIC assignment of the Champion Bank
participation to Beal Bank, as previously stated in this litigation, BBSL
may claim damages from the FDIC in an administrative action, 12 U.S.C.
§ 1821(d)(3)-(13), though whether BBSL could recover any such damages
against the FDIC is unclear, e.g., 12 U.S.C. § 1821(e)(3)(B)(ii)
(precluding damages for lost profits). Regardless, such a claim has not
been filed and is not before the court.
- 14 -
Alternatively, BBSL argues that Beal Bank’s claim arises under the
Assignment, not the Participation Agreement.
Putting aside the issue of
the validity of the Assignment, Beal Bank’s entitlement to proceeds from
the Ratteree loan payments, pursuant to the Champion Bank participation,
arises in equal parts from not only the Assignment document but also from
§ 14 of the Participation Agreement.
The relevant portion of § 14 of the
Participation Agreement states:
If any lawsuit or proceeding is brought by either party to
enforce the terms of this Agreement, the unsuccessful party
agrees to pay the prevailing party’s court costs and
reasonable attorneys’ fees incurred in bringing or defending
such action.
(Doc. 1-1 at 4.)
On the claim made by Beal Bank against BBSL for payment of loan
proceeds under the Participation Agreement, Beal Bank is the “prevailing
party” and BBSL is the “unsuccessful party” under § 14, because BBSL has
impliedly agreed that Beal Bank is entitled to the proceeds from the
Champion Bank participation in the Ratteree loan payments.
Bank of
Commerce, 2011 WL 4635929, at *4 (also rejecting BBSL’s argument and
reaching the same conclusion).
Beal Bank has also prevailed on its
motion to dismiss BBSL’s counterclaims. Therefore, Beal Bank is entitled
to its court costs and “reasonable attorneys’ fees” under § 14.
In this diversity action, the court looks to Missouri law regarding
the amount of reasonable attorneys’ fees.
Weitz Co. v. MH Washington,
631 F.3d 510, 528 (8th Cir. 2011). Beal Bank’s entitlement to attorneys’
fees is based upon the contractual Participation Agreement.
“Where the
claim to attorneys’ fees is based upon a contract, the court must adhere
to the terms of the contract and may not go beyond it.”
Pracna, 167 S.W.3d 706, 714 (Mo. banc 2005).
Trimble v.
Missouri law also cloaks
the court with expertise in “fashioning an award of attorneys’ fees.”
Western Blue Print Co., LLC v. Roberts, ___ S.W.3d ___, 2012 WL 1339380,
at *14 (Mo. banc 2012).
In the application of its expertise, the court
considers:
(1) the time, nature, character and amount of services
rendered; (2) the nature and the importance of the litigation;
(3) the degree of responsibility imposed on or incurred by the
attorney; (4) the amount of property or money involved;
(5) the degree of professional ability, skill and experience
- 15 -
that was called for and used; and (6) the result that was
achieved.
Recovery is limited to the reasonable value of
services rendered, not to exceed the contracted fee, and
payable only upon the occurrence of the contingency.
In
addition, a client should not have to pay for duplicative
service, and, as in all cases relating to quantum meruit, the
services must have enriched the client in the sense of
benefits conferred.
Turpin v. Anderson, 957 S.W.2d 421, 427 (Mo. App. W.D. 1997) (internal
citations omitted).
Stated another way, in determining reasonable attorneys’ fees for
a prevailing party, “[t]he lodestar, the starting point in determining
attorneys’ fees, is determined by multiplying the number of hours
reasonably expended by the reasonable hourly rate."
Alhalabi v. Mo.
Dep’t of Natural Res., 300 S.W.3d 518, 530 n.6 (Mo. App. E.D. 2009)
(internal citation omitted); accord McClelland v. Life Ins. Co. of N.
Am., ___ F.3d ___, 2012 WL 1868782, at *4 (8th Cir. 2012).
The loadstar
amount “roughly approximates the fee that the prevailing attorney would
have received if he or she had been representing a paying client who was
billed by the hour in a comparable case.”
Perdue v. Kenny A. ex rel.
Winn, ___ U.S. ___, 130 S. Ct. 1662, 1672 (2010).
Beal Bank seeks a total of $132,143.17 in attorneys’ fees, costs,
and expenses.
For the legal services rendered by the Stinson Morrison
Hecker firm through February 21, 2012, it seeks $72,102.52.
For the
legal services rendered by the McKenna, Long & Aldridge firm through
August 26, 2011, it seeks $60,040.65.
BBSL objects that these fees are grossly excessive, because (a) no
discovery requests were ever made and responded to by the parties,
(b) the only motions have been to dismiss and for summary judgment, and
(c) the fees of two law firms have been submitted, one of which, the
McKenna, Long & Aldridge firm, has never entered its appearance in the
case, had never been previously disclosed to the court, and was not
involved in the operative facts of this case.
The court agrees that the current record does not support recovery
for the services of the McKenna, Long & Aldridge firm. First, in support
of those services, Beal Bank has submitted basic fee bills from which
much information has been redacted, to the extent that the court is
- 16 -
unable to discern for many entries the subject matter of the services
rendered.
See Quigley v. Winter, 598 F.3d 938, 956 (8th Cir. 2010)
(“Where the documentation of hours is inadequate, the district court may
reduce the award accordingly.” (citation omitted)); e.g., Bores v.
Domino’s Pizza LLC, Civ. No. 05-2498 (RHK/JSM), 2008 WL 4755834, at *6
(D. Minn. Oct. 27, 2008) (attorney’s billing statements lacked sufficient
detail
for
the
court
to
ascertain
whether
the
time
expended
was
reasonably necessary, redundant, or excessive).
Among the factors assigned to the court for determining reasonable
attorneys fees is whether duplicative or unnecessary legal service was
rendered.
The use of a second law firm relates to this issue.
While
litigation involving FIRREA may require a measure of expertise, the
record contains no statement by the Stinson Morrison Hecker firm that it
was not capable of this research and service, nor does the record contain
any documentation regarding Beal Bank’s contractual engagement of the
McKenna firm in this matter.
That the McKenna firm did not enter its
appearance in this litigation to represent Beal Bank further clouds its
involvement.
The justification for the use of the McKenna firm in this
action and why its services were not duplicative has not been provided
to the court.
See generally, Hensley v. Eckerhart, 461 U.S. 424, 437
(1983) (explaining that the party seeking attorneys’ fees bears the
burden of establishing its entitlement to a fee award).
Because further litigation is necessary to decide what amount of
money,
if
any,
Beal
Bank
is
entitled
to
under
the
Champion
Bank
participation, a final determination of a reasonable attorneys fee for
plaintiff as the prevailing party is premature.
For the reasons set forth above and to the extent set forth above,
IT IS HEREBY ORDERED that the motion of plaintiff Beal Bank USA for
summary judgment (Doc. 29) is sustained in part and otherwise denied.
IT IS FURTHER ORDERED that a non-jury trial of this action is set
for Wednesday, September 12, 2012, at 9:00 a.m.
/S/
David D. Noce
UNITED STATES MAGISTRATE JUDGE
Signed on June 13, 2012.
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