TCP Printing Co., LLC v. Enterprise Bank & Trust

Filing 21

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction 10 is DENIED. IT IS FURTHER ORDERED that Defendant's Motion to Dismiss for Failure to State a Claim 11 is DENIED. I T IS FURTHER ORDERED that Defendant's Motion to Strike Jury Demand and Enforce Waiver of Jury Trial 13 is DENIED as moot. IT IS FIINALLY ORDERED that a Rule 16 conference will be set by separate order.. Signed by District Judge John A. Ross on 8/11/15. (LGK)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

TCP PRINTING CO., LLC,
Plaintiff,
v.
ENTERPRISE BANK & TRUST,
Defendant.

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No. 4:15-CV-178 JAR

MEMORANDUM AND ORDER
This matter is before the Court on Defendant’s Motions to Dismiss for Lack of Subject
Matter Jurisdiction (Doc. No. 10) and Failure to State a Claim (Doc. No. 11) and Motion to
Strike Jury Demand and Enforce Waiver of Jury Trial. (Doc. No. 13) The motions are fully
briefed and ready for disposition.
I.

Background

Plaintiff TCP Printing Co., LLC (“TCP”), a Pennsylvania limited liability company,
brings this action for breach of contract (Count I), breach of the implied covenant of good faith
and fair dealing (Count II), conversion (Count III) and unjust enrichment (IV) against Defendant
Enterprise Bank & Trust (“Enterprise”), a Missouri corporation.
In early 2014, TCP became interested in purchasing JPB Investments VI LLC (“JPB” or
“Borrower”), a financially distressed printing company, and taking over its business operations.
(Complaint (“Compl.”), Doc. No. 1 at ¶ 17) At that point JPB had already defaulted on three
loans extended by Enterprise, and owed Enterprise over $1.9 million. (Id. at ¶¶ 10-12, 15-16)
Accordingly, Enterprise had a first priority lien on substantially all of JPB’s assets.

To facilitate TCP’s purchase of JPB, Enterprise, JPB and TCP entered in an Agreement
Relating to Collateral (“the Collateral Agreement”) on May 22, 2014. (Id. at ¶ 19; Doc. No. 1-4)
The Collateral Agreement provided that all proceeds from JPB’s inventory, accounts receivable
and work in progress identified in Exhibit A to the Collateral Agreement would be paid to
Enterprise and applied to the outstanding loan balance. (Id. at ¶ 22; Doc. No. 1-4 at ¶ 5) The
Collateral Agreement further provided that any proceeds from post-closing work funded by TCP
and not listed on Exhibit A would be outside the scope of Enterprise’s lien, and belong to TCP:
6. Lender’s Release of Lien Regarding Inventory and Work-in Progress Funded by TCP.
Lender agrees to not assert its lien, security interest or any claim regarding the
Borrower’s Inventory and Work-in-Progress that is funded by TCP and is not listed on
Exhibit A thereto.
(Id. at ¶¶ 23-24) Consistent with this “carve-out,” Paragraph 3 of the Collateral Agreement
provided that “[a]ll of the inventory listed on Exhibit A will be segregated and identified
separately from all inventory purchased through funds provided by TCP.” (Id. at ¶ 25)
The Collateral Agreement also provided that TCP would purchase from JPB, for
$885,800.00, such of JPB’s equipment as was listed on a schedule attached to the Collateral
Agreement as Exhibit B. If TCP was unable to obtain financing for the equipment purchase, or to
otherwise pay the equipment price, by the expiration date, then TCP would be obligated to
“immediately vacate the Borrower’s premises and all of TCP’s rights under this Agreement with
regard to the property listed on Exhibits A and B hereto shall cease and terminate.” (Id. at ¶¶ at
27-28)
When TCP was unable to obtain financing or otherwise pay for the equipment by the
specified date, Enterprise invoked its right under the Collateral Agreement to demand that TCP
vacate JPB’s premises. (Id. at ¶¶ 29-31) Thereafter, according to TCP, Enterprise caused
approximately $317,762 in TCP-funded work to be applied towards payment of the outstanding

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loans. (Id. at ¶¶ 47, 57) TCP alleges Enterprise’s misappropriation of revenue due TCP has
deprived it of the cash flow necessary to continue its operations. (Id. at ¶ 53)
Enterprise moves to dismiss the action either for lack of jurisdiction under Fed.R.Civ.P.
12(b)(1) or failure to state a claim under Fed.R.Civ.P. 12(b)(6). To the extent the complaint is
not dismissed in its entirety, Enterprise moves to strike TCP’s jury demand and enforce a jury
trial waiver in the Collateral Agreement.
II.

Legal standard

A motion to dismiss under Fed.R.Civ.P. 12(b)(1) challenges the Court's subject matter
jurisdiction to hear the case. A court has broad authority to decide its own right to hear a case,
and it can consider matters outside of the pleadings when deciding a “factual attack” under Rule
12(b)(1). Osborn v. United States, 918 F.2d 724, 729 n. 6 (8th Cir.1990); see Ozark Society v.
Melcher, 229 F.Supp.2d 896, 902 (E.D.Ark.2002) (explaining that a “factual attack” challenges
the existence of subject matter jurisdiction in fact, irrespective of the pleadings). Further, when
the defendant makes a “factual attack,” it is the plaintiff's burden to establish that jurisdiction
exists, and “no presumptive truthfulness attaches to the plaintiff's allegations.” Osborn, 918 F.2d
at 730 (quoting Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir.1977)). In
other words, the non-moving party does not have the benefit of Rule 12(b)(6) safeguards in a
factual attack. Id. at 729 n. 6.
To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), “a complaint must contain
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 Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). A claim is facially plausible “when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct

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alleged.” Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). “While a complaint attacked by
a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's
obligation to provide the ‘grounds' of his ‘entitle[ment] 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, 127 S.Ct. 1955 (alteration in original) (citations omitted). “When
ruling on a motion to dismiss [under Rule 12(b)(6)], the district court must accept the allegations
contained in the complaint as true and all reasonable inferences from the complaint must be
drawn in favor of the nonmoving party.” Young v. City of St. Charles, 244 F.3d 623, 627 (8th
Cir.2001).
III.

Discussion

A. Subject matter jurisdiction
For limited liability companies, the Court must examine the citizenship of each member
of the limited liability company for purposes of diversity jurisdiction. GMAC Commercial
Credit, LLC v. Dillard Dep't Stores, Inc., 357 F.3d 827, 829 (8th Cir.2004). TCP alleges “its
members are citizens of states other than Missouri.” (Compl. at ¶ 1) Enterprise contends TCP’s
failure to specifically plead the citizenship of its members fails to satisfy its burden of
establishing diversity under 28 U.S.C. § 1332.
In response, TCP submits the declaration of its President and sole member, Gregory
Bozzi. (Bozzi Declaration, Doc. No. 17-1) Bozzi states he resides in Pennsylvania and is a
citizen of Pennsylvania. (Doc. No. 17-1 at ¶ 4) As the Complaint alleges that Enterprise is a
Missouri corporation with its principal place of business in Missouri (see Compl. at ¶ 2), it
appears that complete diversity exists and this Court has proper subject matter jurisdiction. See
Infinaquest, LLC v. Directbuy, Inc., 2012 WL 3921776, at *2 (N.D.Ind. Sept. 7, 2012).

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Enterprise has not contested the amount in controversy threshold for diversity jurisdiction
and declined to file a reply in this case, indicating it no longer disputes that diversity exists.
Accordingly, the motion to dismiss for lack of subject matter jurisdiction will be denied.
B. Failure to state a claim
Breach of contract (Count I)
To state a claim for breach of contract, a plaintiff must plead the traditional elements of
formation, performance, breach and damages. See Gen. Mills Operations, LLC v. Five Star
Custom Foods, Ltd., 789 F. Supp. 2d 1148, 1155 (D. Minn. 2011). Here, TCP alleges the
conditions precedent to the effectiveness of the Collateral Agreement, as defined in Paragraph
13, were met. (Compl. at ¶ 56) TCP further alleges Enterprise breached the Collateral Agreement
by, inter alia, taking possession of proceeds from work that was funded by TCP and not listed on
Exhibit A to the Collateral Agreement. (Id. at ¶ 57) Finally, TCP alleges that as a result, it has
incurred losses in the amount of $317,762, plus accrued interest and profits lost as a consequence
of being forced to shut down its operations. (Id. at ¶ 58) Enterprise argues this claim should be
dismissed because TCP failed to satisfy a condition precedent, i.e., that TCP’s signature be
notarized. Alternatively, Enterprise argues the Collateral Agreement expired before Enterprise
applied Borrower's money toward payment of the loan. (Doc. No. 12 at 4-7)
TCP responds that Enterprise waived this condition by proceeding to act in accordance
with the Agreement and closing on the transaction to acquire JPB. (Doc. No. 18 at 7-10) In
addition, Enterprise is collaterally estopped from contesting the Agreement’s effectiveness in
light of its June 2, 2014 letter invoking its rights under the Agreement and requiring TCP to
vacate the premises. TCP further argues Enterprise’s alternative argument that the Agreement

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had expired is belied by the fact that Enterprise reserved its rights to continue to enforce the
Agreement in its June 2, 2014 letter. (Id. at 10-11)
The Court is not reviewing the merits of the claim at this stage of the proceedings. These
are matters to be determined by the evidence. The Court finds Count I is sufficiently pled.
Breach of the implied covenant of good faith and fair dealing (Count II)
Related to the breach of contract claim is the claim that Enterprise breached the implied
covenant of good faith and fair dealing. Enterprise argues this claim must be dismissed because
like the claim for breach of contract, the alleged misconduct occurred after the collateral
Agreement expired. (Doc. No. 12 at 7) Again, the Court is not reviewing the merits of the claims
at this stage of the proceedings. The Court finds Count II is sufficiently pled.
Conversion (Count III)
Under Missouri law, conversion is “the unauthorized assumption and exercise of
ownership rights over the … property of another party to the exclusion of the owner's rights.”
Mueller v. Barton, 2014 WL 4546061, at *16 (E.D.Mo. Sept. 12, 2014) (citing IOS Capital, LLC
v. Allied Home Mortg. Capital Corp., 150 S.W.3d 148, 152 (Mo.Ct.App.2004)). A claim for
conversion may be established in one of three ways: “(1) by showing a tortious taking, (2) a use
or appropriation by the defendant indicating a claim or right in opposition the owner, or (3) a
refusal to give up possession on demand.” Boswell v. Panera Bread Co., 2015 WL 631259, at *3
(E.D.Mo. Feb. 12, 2015) (quoting Envirotech, Inc. v. Thomas, 259 S.W.3d 577, 592
(Mo.Ct.App.2008)). Although conversion “generally is not a proper [legal] theory where the
claim involves money, as opposed to a specific chattel,” Mueller, 2014 WL 4546061, at *16
(quoting Johnson v. GMAC Mortg. Corp., 162 S.W.3d 110, 125 (Mo.Ct.App. 2005)), specific
checks, drafts or notes will support a cause of action for conversion where they can be described

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or identified as a specific chattel. Capitol Indem. Corp. v. Citizens Nat. Bank of Fort Scott, N.A.,
8 S.W.3d 893, 900 (Mo.Ct.App. 2000).
Here, TCP alleges Enterprise took possession of all proceeds from TCP-funded work,
depositing same in its cash account and applying them to the outstanding loan balance, thereby
depriving TCP of the right to possession. (Compl. at ¶¶ 37-45, 66-67) Enterprise contends TCP’s
conversion claim fails because the money at issue cannot be specifically identified, a requirement
to maintain a conversion claim. (Doc. No. 12 at 7-8) In response, TCP contends the checks that
were allegedly converted can be specifically identified by attributing them to the invoices at
issue. According to TCP, Enterprise diverted proceeds from TCP-funded work into a single cash
account. Because the funds were commingled after, not before, the misappropriation took place,
TCP asserts its conversion claim has been adequately pled. (Doc. No. 18 at 12-14) TCP argues it
should be permitted to conduct discovery to determine how and under what circumstances the
checks for TCP-funded work ended up in a single account over which Enterprise exercised de
facto control. (Id. at 14)
Assuming for purposes of a motion to dismiss that the allegations in the Complaint are
true, the Court finds these allegations are sufficient to state a claim for conversion. See FCA
Constr. Co., LLC v. Singles Roofing Co., 2011 WL 5275852, at *2 (D.Minn. Nov. 3, 2011)
(denying a motion to dismiss a conversion claim where “plaintiff has alleged that it held a
property interest in the money at issue and was wrongfully deprived of its property interest in
that money by [defendant]'s misappropriation of it”).
Unjust enrichment (Count IV)
To state a claim for unjust enrichment, a plaintiff must allege (1) a benefit was conferred
upon the defendant, (2) at the expense of the plaintiff, and (3) it would be unjust to allow the

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defendant to retain the benefit. Federated Mut.Ins.Co. v. Peery’s Auto Parts, LLC, 2012 WL
3062720, at *2 (W.D.Mo. July 26, 2012) (citing S&J, Inc. v. McLoud & Co., 108 S.W.3d 765,
768 (Mo.Ct.App. 2003)). The Court finds TCP’s claim is properly pled in the alternative to its
breach of contract claim, see Bradbury v. Network Enterprises, Inc., 2013 WL 587884, at *5
(E.D.Mo. Feb. 13, 2013); Fed.R.Civ.P. 8(d), and alleges sufficient facts showing Enterprise was
unjustly enriched by the receipt of a benefit at the expense of TCP. TCP alleges Enterprise
received a benefit in the amount of $317,762 in proceeds from work funded by TCP and was
enriched by that benefit at the expense of TCP when it applied those proceeds toward payment of
JPB’s loans. (Compl. at ¶¶ 39-45, 70-74)
In support of its motion to dismiss, Enterprise argues there is no inequity in a lender
applying a borrower’s funds toward payment of a loan. (Doc. No. 12 at 9) Yet viewing the
allegations in the light most favorable to TCP, Enterprise’s application of proceeds belonging to
TCP to JPB’s loan constitutes an unjust retention of a benefit. Accordingly, the motion to
dismiss TCP’s claim for unjust enrichment will be denied.
Jury trial waiver
Given the Court’s ruling herein denying Enterprise’s motion to dismiss, TCP does not
contest Enterprise’s motion to enforce the Collateral Agreement’s jury-waiver provision. (See
Doc. No. 19 at 2) The motion to enforce jury-waiver provision will, therefore, be denied as moot.
Accordingly,
IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss for Lack of Subject
Matter Jurisdiction [10] is DENIED.
IT IS FURTHER ORDERED that Defendant’s Motion to Dismiss for Failure to State a
Claim [11] is DENIED.

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IT IS FURTHER ORDERED that Defendant’s Motion to Strike Jury Demand and
Enforce Waiver of Jury Trial [13] is DENIED as moot.
IT IS FIINALLY ORDERED that a Rule 16 conference will be set by separate order.

Dated this 11th day of August, 2015.

JOHN A. ROSS
UNITED STATES DISTRICT JUDGE

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