PNC BANK, NATIONAL ASSOCIATION v. STAR GROUP COMMUNICATIONS, INC. et al
OPINION. Signed by Judge Noel L. Hillman on 8/24/2017. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
HONORABLE NOEL L. HILLMAN
PNC BANK, N.A.,
CIVIL ACTION NO. 15-5108
STAR GROUP COMMUNICATIONS,
INC., LINDA ROSANIO-TALAMO,
and JANNARO TALAMO,
DUANE MORRIS LLP
By: James J. Holman, Esq.
Michael S. Zullo, Esq.
Sommer L. Ross, Esq.
30 South 17th Street
Philadelphia, Pennsylvania 19103
Counsel for Plaintiff
TARTER KRINSKY & DROGIN LLP
By: Linda S. Roth, Esq.
Richard C. Schoenstein, Esq.
Jonathan Temchin, Esq.
475 Wall Street
Princeton, New Jersey 08540
Counsel for Defendants Linda Rosanio-Talamo and
HILLMAN, United States District Judge:
The parties’ disputes arise out of a series of commercial
loan transactions between Plaintiff PNC Bank, and Defendant Star
Group Communications, Inc.
PNC Bank contends that Star Group
defaulted on its obligations, and in its three-count breach of
contract complaint, seeks to collect over $8.7 million from Star
Group as the Borrower (Count 1), or the individual Defendants,
Linda Rosanio-Talamo (Count 2) and Jannaro Talamo (Count 3)
(collectively, “the Talamos”), as the Guarantors of the debt at
The Talamos, in turn, assert eight different counterclaims
against PNC Bank, all of which are rooted in the Talamos’ theory
acting irrationally and capriciously, . . . seized
control of the accounts, the personnel, and the
operations of Star, and interfered with any and all
attempts of Star and the Individual Defendants to obtain
financing or to consummate transactions that would have
recapitalized Star and paid off the Bank. Thereby, the
Bank directly caused the demise of Star, resulting in
the shutting down of its operations and subjecting it to
involuntary bankruptcy proceedings. . . . As a result,
the Individual Defendants lost their 30 year-old
company, valued at no less than $30 million, plus another
$3 million in personal savings that the Individual
Defendants had invested to bridge the gap to closing
with the private equity investor.
(Amended Answer ¶ 98, 100)
The Amended Answer asserts that “the
Bank should be held to account for the $30 million loss to the
Individual Defendants and other damages, compensatory as well as
punitive, as may be determined by this action.” (Id. ¶ 155)
The Court has diversity of citizenship subject matter
jurisdiction pursuant to 28 U.S.C. § 1332. The parties are
completely diverse and the amount in controversy well exceeds
the statutory minimum.
Presently before the Court is PNC Bank’s Motion to Dismiss
the Talamo’s counterclaims pursuant to Fed. R. Civ. P. 12(b)(6).
For the reasons stated herein, the Motion will be granted in
part and denied in part.
Linda Rosanio-Talamo was Star’s founder and CEO. (Amend.
Answer ¶ 108)
Jannaro Talamo was Star’s Chief Creative Officer,
and is Linda’s husband. (Id. ¶ 109)
As officers of Star, their
relationship with PNC Bank began in 2007. (Id. ¶ 110)
time, PNC Bank allegedly induced Star and the Talamos to move
their credit from Bank of America to PNC Bank “predicated on
[PNC] Bank’s insistence that it could help grow their business.”
(Id. ¶ 110)
According to the Talamos, PNC Bank was “highly motivated”
to loan money to Star and “consistently encouraged” Star to
utilize the $10 million combined credit line that PNC Bank
provided to Star “from the very outset of the relationship.”
(Amend. Answer ¶ 111, 113)
Allegedly, PNC Bank “never suggested
that the combined $10 million credit line was excessive or made
any attempt to further limit overall exposure for the Bank.”
(Id. ¶ 113)
To the contrary, the Talamos allege that in 2010, PNC Bank
“counseled against” “the possibility of an infusion of equity to
reset [Star’s] balance sheet,” instead “convincing” the Talamos
“that they should . . . fuel Star’s growth with ‘inexpensive’
bank debt,” rather than equity. (Amend. Answer ¶ 115)
so, PNC Bank, allegedly, “was acting in its own interest, trying
to prolong a financially beneficial relationship whether or not
that arrangement was in the best interests of the Individual
Defendants or their company.” (Id. ¶ 116)
Allegedly, in connection with Star taking on more debt, PNC
Bank “surreptitiously raised the amounts supposedly guaranteed
by [the Talamos] from $2 million to the entire $10 million.
Nobody at Star, including in-house counsel, caught the amended
guarantees since they were never part of the discussions.”
(Amend. Answer ¶ 116)
Then, “the Great Recession” occurred and Star’s financial
situation changed. (Amend. Answer ¶ 117)
[i]n 2013 and 2014, the Individual Defendants invested
approximately $3 million of their own savings into Star.
Under the circumstances, they had become intent upon
securing additional capital and retiring any remaining
debt with the Bank, which was due to mature in early
2015. The resetting of Star’s balance sheet would have
been beneficial to the company’s long-term financial
well-being and that of the Individual Defendants.
Accordingly, and against the advice of the Bank, the
Individual Defendants began preparing the company for a
capital raise and made road show presentations to
various private equity sources.
On November 24, 2014, Star allegedly signed a term sheet
for a transaction with Peachtree Capital Corporation and Star
Mountain Capital (“SMC”) with the intent that the proceeds of
the transaction would be used “to retire the bank debt in full,
pay down the company’s accounts payable, and have a reserve to
fuel growth.” (Amend. Answer ¶ 118)
According to the Talamos, they told PNC Bank about the
Peachtree/SMC transaction-- which was “originally projected to
close . . . in the first quarter of 2015” (Amend. Answer ¶ 118)- and their intent to use the transaction’s proceeds “to pay the
note that was due as of December 31, 2014, as well as the entire
balance of their outstanding loans.” (Id. ¶ 124)
“In the beginning of 2015,” - i.e., after at least one of
Star’s notes had become due - PNC Bank’s “attitude” allegedly
“changed drastically.” (Amend. Answer ¶ 127)
PNC Bank allegedly
“demanded that an outside consultant be hired to assess Star’s
ability to manage cash flow and assist in the closing with
Although Star hired a consultant who PNC
Bank allegedly approved, the bank also separately engaged an
additional consultant. (Id.)
PNC Bank also moved Star from its
“regular account team” to the bank’s “workout group.” (Amend.
Answer ¶ 128)
By February, 2015, the parties’ relationship allegedly
deteriorated further. (Amend. Answer ¶ 129)
The Talamos allege
that in several different ways, PNC Bank was “actively
interfering with the day-to-day management of Star” which
directly caused “the delay in the closing” of the Peachtree/SMC
As the situation worsened, PNC Bank allegedly compounded
“When Star sought assistance from the Credit
Policy Department with respect to temporary cash flow pressures
it faced to meet payroll and payables, the Credit Policy
Department” allegedly “turned a deaf ear.” (Amend. Answer ¶ 133)
The Talamos allege that, “[r]ather than provide assistance, the
Bank simply piled on additional cash flow demands when Star
could least afford them.” (Id.)
In May 2015, the Talamos assert that they “realized their
only path to closing the Peachtree/SMC deal was buy the Bank
out.” (Amend. Answer ¶ 136)
Accordingly, the parties allegedly
anticipated that Allied Financial Group would buy Star’s debt
from PNC Bank at “a steep discount.” (Id. ¶ 136) 2
However, the Talamos allege that PNC Bank “torpedoed” this
transaction as well, by “put[ting] Allied through an onerous and
contentious process to close, which led Allied to unreasonably
doubt the sufficiency of the accounts receivable that would fund
the loan.” (Amend. Answer ¶ 142)
On the afternoon of June 23, 2015, “Allied pulled out of
the transaction entirely.” (Amend. Answer ¶ 144)
The next day,
Also in May 2015, PNC Bank sent Star a formal letter declaring
default. (Amend. Answer ¶ 153 and Compl. Ex O)
PNC Bank allegedly “sent dozens of letters to Star’s clients
asserting the Bank’s purported rights to client receivables.”
(Id. ¶ 145)
On July 1, 2015, “Star announced it had to cease
operations.” (Amend. Answer ¶ 147)
On August 17, 2015, “three
of Star’s creditors commenced an involuntary bankruptcy
proceeding under Chapter 7.” (Id. ¶ 151)
When considering a motion to dismiss a complaint for
failure to state a claim upon which relief can be granted
pursuant to Federal Rule of Civil Procedure 12(b)(6), a court
must accept all well-pleaded allegations in the complaint as
true and view them in the light most favorable to the plaintiff.
Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 2005).
It is well
settled that a pleading is sufficient if it contains “a short
and plain statement of the claim showing that the pleader is
entitled to relief.”
Fed. R. Civ. P. 8(a)(2).
Under the liberal federal pleading rules, it is not
necessary to plead evidence, and it is not necessary to plead
all the facts that serve as a basis for the claim. Bogosian v.
Gulf Oil Corp., 562 F.2d 434, 446 (3d Cir. 1977).
Federal Rules of Civil Procedure . . . do require that the
pleadings give defendant fair notice of what the plaintiff’s
claim is and the grounds upon which it rests.” Baldwin Cnty.
Welcome Ctr. v. Brown, 466 U.S. 147, 149-50 n.3 (1984)
(quotation and citation omitted).
A district court, in weighing a motion to dismiss, asks
“‘not whether a plaintiff will ultimately prevail but whether
the claimant is entitled to offer evidence to support the
claim.’” Bell Atlantic v. Twombly, 550 U.S. 544, 563 n.8 (2007)
(quoting Scheuer v. Rhoades, 416 U.S. 232, 236 (1974)); see also
Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009)(“Our decision in
Twombly expounded the pleading standard for ‘all civil actions’
. . . .”); Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.
2009)(“Iqbal . . . provides the final nail in the coffin for the
‘no set of facts’ standard that applied to federal complaints
The counterclaims asserted are: (1) rescission of the
Talamos’ individual guarantees; (2) common law fraud; (3)
violation of the New Jersey Consumer Fraud Act, N.J.S.A. § 56:81 et seq.; (4) negligent misrepresentation; (5) breach of
fiduciary duty; (6) breach of the duty of good faith and fair
dealing; (7) tortious interference with the transactions with
Peachtree/SMC and Allied; and (8) negligence.
In support of its Motion to Dismiss, PNC Bank asserts that
the Talamos lack standing to assert any of the counterclaims.
It also individually attacks each counterclaim.
PNC Bank asserts that the Talamos seek recovery for harm to
Star, rather than themselves as guarantors.
the derivative injury rule, they lack standing to assert all of
The Talamos’ response is two-fold: (1) not
all of their claims are predicated on harm to Star; and (2) an
exception to the derivative injury rule applies.
The basic rule of law is not in dispute: shareholders and
officers do not have standing to assert claims alleging wrongs
to their corporation. Cent. Jersey Freightliner, Inc. v.
Freightliner Corp., 987 F. Supp. 289, 301 (D.N.J. 1997); Pepe v.
General Motors Acceptance Corp., 254 N.J. Super. 662, 666 (App.
The parties do dispute, however, whether the
Talamos seek to recover for alleged wrongs to Star, as opposed
In this regard, the Amended Answer asserts the
Count 1 – Rescission; the guarantees that the Talamos
executed were not supported by consideration and were
procured by fraud and/or economic duress
Count 2 – Fraud; intentional misrepresentation,
Defendants that the Bank believed the line of
credit [extended to Star] was excessive;
failing to advise the Individual Defendants
that they should not utilize the full extent
of the line of credit extended by the Bank [to
representing that the Individual Defendants
should avoid raising capital [for Star]
through equity grants, and [Star] would be
better off continuing bank debt that the Bank
believed was excessive in amount;
inducing Individual Defendants to enter into
surreptitiously raised) and releases that were
solely to the benefit of the Bank;
representing that the Bank would support a
[Star] transaction with Peachtree/SMC when, in
consummating such a transaction; and
representing that the Bank would take a
transaction with Allied when, in fact, the
Bank had no intention of consummating such a
Count 3 – New Jersey Consumer Fraud Act based on the same
alleged misrepresentations as the common law fraud claim
Count 4 – Negligent misrepresentation based on the same
alleged misrepresentations as the common law fraud claim
Count 5 – breach of fiduciary duty based on the same
alleged misrepresentations as the common law fraud claim
interfering with the operations of the
Individual Defendants and their business;
interfering with the reputation of the
community that they served;
interfering with [Star’s]
Count 6 – Breach of Good Faith and Fair Dealing based on
the same alleged breaches as the breach of fiduciary
Count 7 – Tortious interference with contract and/or
business opportunity: “[t]he Bank interfered with
[Star’s] transactions with Peachtree/SMC and Allied.”
Count 8 – Negligence based on the same alleged wrongs as
the breach of fiduciary duty claim
Some of these alleged injuries are injuries to Star and not
Most clearly, the tortious interference count
alleges that PNC Bank interfered with contemplated contracts and
business opportunities that were Star’s, not the Talamos’.
Thus, Count 7 is barred by the derivative injury rule.
Likewise, to the extent Counts 5, 6 and 8 are predicated on
the same alleged interferences-- see (i) and (j)-- such claims
are also barred.
On the other hand, claims based on allegations that PNC
Bank fraudulently induced the Talamos themselves to sign
personal guarantees-- Counts 1, 2(d), 3(d), and 4(d) -- are
clearly not barred by the derivative injury rule.
The remainder of the alleged injuries in Counts 2, 3 and 4,
as well as Counts 5, 6 and 8 to the extent they assert identical
injuries-- i.e., (a) through (c) and (e) through (f) of each
Count-- are injuries to Star.
The alleged misrepresentations
were about Star’s line of credit and Star’s transactions which
allegedly caused the Talamos, acting in their capacity as Star’s
officers, to take, or not take, certain actions on behalf of
Lastly, the Amended Answer’s allegations that PNC Bank
interfered with (g) “the operations of the Individual
Defendants,” independent from interference with Star, and (h)
“the reputation of the Individual Defendants in the business
community that they served,” are, at this early stage of the
case, sufficiently particular to the Talamos, as distinct from
Star, to survive the instant motion to dismiss.
Further, no exception to the derivative injury rule saves
the barred claims.
While the Talamos are correct that courts
within this District have held, as a matter of New Jersey law,
that an “exception” to the standing rule applies when both
guarantor and surety are joined as defendants, the courts have
only done so in cases where the guarantor asserts a counterclaim
for breach of contract and breach of the duty of good faith and
fair dealing implied in the contract. See Wingate Inns Int’l,
Inc. v. Cypress Centre Hotels, LLC, 2012 WL 6625753 (D.N.J.
2012); Coldwell Banker Real Estate, LLC v. Plummer & Assoc.,
Inc., 2009 WL 3230840 (D.N.J. 2009); Travelodge Hotels, Inc. v.
Elkins Motel Assoc., Inc., 2005 WL 2656676 (D.N.J. 2005).
Extending those cases’ “exception” to all of the claims the
Talamos assert in this case-- none of which are breach of
contract and most of which largely sound in tort and, indeed,
fraud-- would effectively swallow the rule. 3
Additionally, Counts 3 and 5 fail for independent reasons
as set forth next.
Count 3, the Consumer Fraud Act claim, to the extent that
it is predicated on the commercial transactions of Star, fails
as a matter of law.
The Talamos argue that “the sale of
consumer credit is generally considered merchandise and
therefore covered by the CFA.” (Opposition Brief, p. 31-32)
Assuming consumer credit is merchandise 4, the problem with this
argument is that the alleged transactions did not involve
consumer credit extended to a consumer, but rather millions of
dollars of commercial credit extended to a business.
As the undersigned has stated before, “‘the entire thrust
of the Consumer Fraud Act is pointed to products and services
In light of this Court’s ruling that no exception to the
derivative injury rule applies, the Court need not reach PNC
Bank’s argument that Star’s claims were released in bankruptcy,
and the Talamos’ counterargument that the release was procured
The CFA applies to unconscionable commercial practices made
“in connection with the sale or advertisement of any
merchandise.” N.J.S.A. § 56:8-2.
sold to consumers in the popular sense.’” CIBC Inc. v. Grande
Vill. LLC, 2015 WL 5723135, at *3 (D.N.J. Sept. 29, 2015)
(quoting J & R Ice Cream Corp. v. California Smoothie Licensing
Corp., 31 F.3d 1259, 1272 (3d Cir. 1994)); see also DepoLink
Court Reporting & Litig. Support Servs. v. Rochman, 430 N.J.
Super. 325, 338 (App. Div. 2013)(“The legislative intent in
enacting the CFA was to curtail the sharp practices and dealings
in the marketing of merchandise and real estate whereby the
consumer could be victimized by being lured into a purchase
through fraudulent, deceptive or other similar kind of selling
or advertising practices.
The Act focuses on compelling those
who sell consumer goods and services to the public to develop
practices that will minimize consumer fraud.”)(internal
citations and quotations omitted).
In this case, as in CIBC,
“the commercial transactions fall outside the purview of the
CFA.” 2015 WL 5723135, at *4.
To the extent that Count 3 is based on the allegation that
PNC Bank fraudulently induced the Talamos to guarantee Star’s
debts, that transaction, too, is not a consumer transaction.
Contrary to the Talamos’ argument, the lone fact that the
guarantees were executed by the Talamos in their personal
capacities does not transform the transaction into a consumer
The Motion to Dismiss Count 3 will be granted.
Count 5, the breach of fiduciary duty claim, fails as a
matter of law because PNC Bank owed no fiduciary duty to either
Star or the Talamos.
The factual allegations are clear
concerning the nature of the parties’ commercial relationship,
and it is not the type of relationship giving rise to fiduciary
“The virtually unanimous rule is that creditor-debtor
relationships rarely give rise to a fiduciary duty.
noted by the Court of Appeals for the Third Circuit, it would be
anomalous to require a lender to act as a fiduciary for
interests on the opposite side of the negotiating table because
their respective positions are essentially adversarial.” United
Jersey Bank v. Kensey, 306 N.J. Super. 540, 552 (App. Div.
1997)(internal citations and quotations omitted).
The Talamos’ allegations that PNC Bank held itself out to
be Star’s and the Talamos’ “partner” in helping to grow Star’s
business, and that the parties’ commercial relationship lasted
eight years, are insufficient to overcome the “general
presumption that the relationship between lenders and borrowers
is conducted at arms-length, and the parties are each acting in
their own interest.” Kensey, 306 N.J. Super. at 553.
The Motion to Dismiss Count 5 will be granted.
The remaining Counts, to the extent that they are not
predicated on alleged injuries to Star, will not be dismissed.
With regard to Count 1, rescission of the guarantees, PNC
Bank asserts that the claim should be dismissed because the
guarantees were supported by adequate consideration.
assuming arguendo that PNC Bank is correct, the Talamos assert
fraud as an independent basis for rescission, and as set forth
next, contrary to PNC Bank’s argument, the fraud allegations
survive the instant motion to dismiss.
PNC Bank argues that the allegations of fraud are
insufficient under Fed. R. Civ. P. 9(b), which requires that “a
party must state with particularity the circumstances
constituting fraud.” (Reply Brief. p. 6-7)
The Court disagrees.
The Talamos have separately identified six alleged
misrepresentations or omissions that they assert support their
fraud claims (see Count 2(a)-(f)), and they have sufficiently
pled facts placing those alleged misrepresentations and
omissions in context.
This is sufficient insofar as the
allegations contain “enough particularity to place defendants on
notice of the precise misconduct with which they are charged.”
United States ex rel. Petras v. Simparel, Inc., 857 F.3d 497,
502 (3d Cir. 2017).
Specifically with regard to the alleged misrepresentations
in connection with the Talamos’ guarantees, the Amended Answer
alleges that PNC Bank “surreptitiously raised the amounts
supposedly guaranteed by [the Talamos] from $2 million to the
entire $10 million.
Nobody at Star, including in-house counsel,
caught the amended guarantees since they were never part of the
discussions.” (Amend. Answer ¶ 116)
As to the breach of duty of good faith and fair dealing
count, to the extent it is independent from the dismissed breach
of fiduciary duty count, the Talamos have sufficiently stated a
claim at this early stage of the case.
“A covenant of good
faith and fair dealing is implied in every contract in New
Jersey.” Wilson v. Amerada Hess Corp., 168 N.J. 236, 244 (2001).
According to the Amended Answer, ¶ 116, “the Bank was acting in
its own self-interest . . .
when it came time to exercise the
credit line for a bridge Loan . . . the Bank surreptitiously
raised the amounts supposedly guaranteed by the Individual
Defendants from $2 million to the entire $10 million.”
the Talamos allege that PNC Bank acted in bad faith when it
“surreptitiously” changed the terms of the parties’ contract.
See Wilson, 168 N.J. at 245 (“good faith performance or
enforcement of a contract emphasizes faithfulness to an agreed
common purpose and consistency with the justified expectations
of the other party; it excludes a variety of types of conduct
characterized as involving ‘bad faith’ because they violate
community standards of decency, fairness or reasonableness.”).
Lastly, as to the negligence claims, Counts 4 and 8, PNC
Bank argues that: (1) it owes no duty to the Talamos and (2) the
economic loss doctrine bars the claims.
Both arguments fail.
Every person has a duty to act with reasonable care under
the circumstances. See generally Weinberg v. Dinger, 106 N.J.
469, 484 (1987)(“The standard of care ordinarily imposed by
negligence law is well established.
To act non-negligently is
to take reasonable precautions to prevent the occurrence of
foreseeable harm to others.
What precautions are ‘reasonable’
depends upon the risk of harm involved and the practicability of
preventing it.”); Lockhart v. Willingboro High Sch., 170 F.
Supp. 3d 722, 737 (D.N.J. 2015) (“‘[F]oreseeable risk is the
indispensable cornerstone of any formulation of a duty of
care.’”)(quoting Dunphy v. Gregor, 136 N.J. 99 (1994)).
the Court holds that PNC Bank has no heightened duty of care
because no fiduciary relationship existed, it does not follow
that PNC Bank may therefore act with less care than it would in
the ordinary course of dealings with borrowers and guarantors.
The economic loss doctrine maintains the “critical”
“distinctions between tort and contract actions.” Saltiel v. GSI
Consultants, 170 N.J. 297, 310 (2002).
economic loss doctrine functions to eliminate recovery on ‘a
contract claim in tort claim clothing.’” G&F Graphic Servs. v.
Graphic Innovators, Inc., 18 F. Supp. 3d 583, 588-89 (D.N.J.
2014)(quoting SRC Constr. Corp. v. Atl. City Hous. Auth., 935 F.
Supp. 2d 796, 801 (D.N.J. 2013)).
If, through a tort claim, a plaintiff “simply seeks to
enhance the benefit of the bargain [he] contracted for,”
Saltiel, 170 N.J. at 315, the economic loss doctrine applies.
If, however, a plaintiff asserts that a defendant breached a
“duty owed to the plaintiff that is independent of the duties
that arose under the contract,” id. at 317, the economic loss
doctrine does not apply.
Among other things, the Talamos allege that PNC Bank
breached its duty of reasonable care when it took actions that
resulted in the disruption of operations of the Talamos’
business and harm to the Talamos’ business reputation in the
Such breach of duty is independent from any duty--
express or implied-- imposed by the guarantees or any contract
to which Star was a party.
Thus, the economic loss doctrine
does not apply.
For the above-stated reasons, PNC Bank’s Motion to Dismiss
the Talamos’ counterclaims will be granted in part and denied in
The Motion will be granted as to Counts 3, 5, and 7 in
their entirety; as well as Count 2(a)-(c) and (e)-(f); Count
4(a)-(c) and (e)-(f); Count 6(a)-(c), (e)-(f), and (i)-(j); and
Count 8(a)-(c), (e)-(f), and (i)-(j).
The Motion will be denied
as to Count 1 in its entirety; as well as Count 2(d); Count
4(d); Count 6(d) and (g)-(h); and Count 8(d) and (g)-(h).
appropriate Order accompanies this Opinion.
Dated: August 24, 2017
At Camden, New Jersey
__s/ Noel L. Hillman __
Noel L. Hillman, U.S.D.J.
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