Doral Money, Inc. v. HNC Properties, LLC
Filing
43
Opinion and Order: The Court GRANTS Plaintiff's Motion 40 to Dismiss HNC Properties, LLC's Amended Counterclaims. Oral Argument set for 11/20/2014 is STRICKEN. Signed on 11/06/2014 by Judge Anna J. Brown. See attached 19 page Opinion and Order for full text. (bb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
DORAL MONEY, INC., d/b/a
DORAL HEALTHCARE FINANCE, a
Delaware corporation,
Plaintiff,
v.
HNC PROPERTIES, LLC, a
Minnesota limited liability
company,
Defendant.
ANNA M. HELTON
DAVID ARDEN ANDERSON
Schwabe Williamson & Wyatt, PC
1211 S.W. Fifth Avenue, Ste. 1800
Portland, OR 97204
(503) 796-3763
Attorneys for Plaintiff
LESLIE S. JOHNSON
CHRISTOPHER H. KENT
Kent & Johnson, LLP
1500 S.W. Taylor Street
Portland, OR 97205
(503) 220-0717
1 - OPINION AND ORDER
3:14-CV-00545-BR
OPINION AND ORDER
TREVOR R. WALSTEN
DANIELLE K. NELLIS
Walsten & Te Slaa, P.A.
7900 Xerxes Avenue South, Suite 2000
Bloomington, MN 55431
(952) 896-5100
Attorneys for Defendants
BROWN, Judge.
This matter comes before the Court on Plaintiff Doral Money,
Inc.’s Motion (#40) to Dismiss HNC Properties, LLC’s Amended
Counterclaims.
For the reasons that follow, the Court GRANTS
Plaintiff’s Motion.
BACKGROUND
On June 1, 2008, Defendant HNC Properties, Inc., LLC and/or
its three members, Ken Clark, Bruce Hinks, and Phillip Nelson,1
entered into a Loan and Security Agreement (Loan 1) with Crystal
Care Home Health Services, Inc.; Crystal Care PCA, Inc.; and
Premier Healthcare Services, Inc. (referred to collectively as
Borrowers)2 in which Defendant provided $750,000 to Borrowers.
1
Clark, Hinks, and Nelson are not named as defendants in
this matter.
2
Plaintiff alleges Defendant HNC Properties, LLC, owns a
majority interest in Borrowers and is also the landlord “for any
one or more of the entities that comprise Borrower[s]. As a
landlord, [Defendant] collects rent . . . on at least a monthly
basis.” Compl. at ¶ 3. Defendant admits in its Amended Answer
that it has acted as the landlord for Borrowers “at certain
times” and has collected rent from Borrowers. Am. Answer at ¶ 3.
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On October 28, 2009, Defendant entered into a Loan and
Security Agreement (Loan 2) with Borrowers under which the
Defendant provided $350,000 to Borrowers.
On June 23, 2010, Defendant entered into a Loan and Security
Agreement (Loan 3) with Borrowers under which Defendant provided
$225,000 to Borrowers.
On April 30, 2012, Plaintiff entered into a Loan and
Security Agreement with Borrowers.
Under the Loan and Security
Agreement Plaintiff provided Borrowers with “certain credit
facilities . . . in the amount of $2,500,000.”
Am. Answer at ¶ 63.
Compl. at ¶ 1;
Pursuant to the Loan Plaintiff agreed to
extend to Borrowers a revolving line of credit up to 2,500,000
provided, among other things, [that] Borrower[s
were] in compliance with the terms of the Loan
Agreement, including . . . maintaining a specified
net worth as calculated in accordance with the
Loan Agreement (the “Net Worth Covenant”), and
maintaining [their] “borrowing base,” as
calculated in accordance with the Loan Agreement
(the “Borrowing Base”), such that the aggregate
outstanding principal balance under the Loan
agreement [sic] would not exceed the Borrowing
Base.
Am. Answer at ¶ 63.
Also on April 30, 2012, Plaintiff, Defendant, and Borrowers
executed a Landlord Subordination Agreement in which Defendant
agreed, among other things, that if Borrowers defaulted on the
Loan Agreement, Defendant would “(a) subordinate [Defendant’s]
right to payments from Borrower[s] to [Plaintiff’s] right to
3 - OPINION AND ORDER
payments under the Loan Agreement; (b) hold in trust all payments
received from Borrower[s]; and (3) [sic] promptly pay to
[Plaintiff] any payments received from Borrower[s].”
Compl. at
¶ 6.
“During the term of the Loan [A]greement” Plaintiff hired
Breslin, Young and Slaughter, LLC (BY&S) to perform
certain auditing and accounting services,
including, but not limited to, asset based
examination and accounting functions, auditing
Borrower[s’] financial reports and statements,
auditing Borrower[s’] assets, accounts receivable
and equipment, advising Borrower[s] concerning
financial, management and accounting issues to
assist [Plaintiff] in making evaluations and
decisions regarding the Loan Agreement, and
providing other related services (collectively the
“Debt/Equity Evaluation”).
Am. Answer at ¶ 65.
At some point before November 7, 2012, Borrowers defaulted
on Loans 1, 2, and 3.
On or about November 7, 2012, Borrowers proposed to
Defendant a repayment schedule and business turn-around plan to
cure the nonpayment defaults then existing under Loans 1, 2, and
3.
Evidently Defendant did not accept this plan because
Defendant alleges in its Amended Answer that Defendant provided
Borrowers with a Confession of Judgment and Forbearance Agreement
on December 21, 2013, which Borrowers rejected.
On January 13, 2013, Borrowers provided a revised recovery
plan to Defendant.
4 - OPINION AND ORDER
On or about January 30, 2013, Borrowers disclosed their
Profit and Loss Statement to Defendant for the period January 15
to January 30, 2013.
On April 5, 2013, Borrowers emailed Defendant and advised
Defendant of various financial obligations of Borrowers;
specifically, money owed by Borrowers to the Internal Revenue
Service (IRS) to be paid in order to prevent the IRS from filing
a lien and funds owed to Borrowers’ outside Certified Public
Accountant (CPA).
On April 18, 2013, Plaintiff advised Defendant that it was
Plaintiff’s position that Borrowers must take immediate action to
avoid an IRS lien and that Plaintiff “would have little option
but to stop funding” if the IRS did effect a lien.
On April 19, 2013, Defendant emailed Borrowers’ accounting
personnel and advised it was having “a hard time following
[Borrowers’] P and L [Profit and Loss Statement].”
In their
reply Borrowers offered to allow Defendant to review any
financial information it found necessary.
On May 2, 2013, Plaintiff emailed Defendant and advised:
In order to provide [Defendant] and principals
additional security as a result of their
additional contribution to [Borrowers] for
delinquent IRS 641 tax payments, [Plaintiff] has
agreed to allow [Defendant] to file a 2nd lien
position behind [Plaintiff]. [Plaintiff’s]
attorneys are preparing a waiver to the [April 30,
2012, Loan Agreement] and will be forwarding it to
[Borrowers] and [Defendant] for review.
5 - OPINION AND ORDER
Am. Answer at ¶ 89.
On May 2, 2013, Defendant entered into a Promissory Note
(Loan 4A) with Borrowers to lend them the funds “necessary to
cure monetary defaults in the Loan Agreement.”
¶ 107.
Am. Answer at
Defendant alleges in its Amended Answer that it entered
into the Promissory Note “in reliance on” the Debt/Equity
Evaluation conducted by BY&S on behalf of Plaintiff.
On May 8, 2013, Defendant advised Plaintiff that it was
“having an outside accountant come into [Borrowers’ office] to
aid in the understanding of the borrowing base.”
¶ 92.
Am. Answer at
Defendant also advised Plaintiff that
a. Borrowers’ CPA and Borrowers’ successor
accounting personnel were not able to express an
accurate and reliable opinion on the accounts
receivable valuation;
b. Defendant could not do its own due diligence
because Borrowers’ books and records did not
express an accurate and reliable opinion on the
accounts receivable valuation; and
c. Defendant could not do its own due diligence to
evaluate Borrowers’ financial strength.
Am. Answer at ¶ 92.
On May 9, 2013, Plaintiff responded and suggested “the best
thing [Borrowers] could do would be to hire a controller/CFO to
run billing, collections and financials.”
Am. Answer at
¶ 94.
On May 20, 2013, Defendant advised Plaintiff that
a. [Defendant’s] outside CPA was not able to
6 - OPINION AND ORDER
express an accurate and reliable opinion on the
accounts receivable valuation;
b. [Defendant’s] outside CPA could not do his own
due diligence because Borrowers’ books and records
did not express an accurate and reliable opinion
on the accounts receivable valuation; and
c. [Defendant’s] outside CPA could not do his own
due diligence to evaluate Borrowers’ financial
strength.
Am. Answer at ¶ 95.
On June 26, 2013, Plaintiff, Defendant, and Borrowers
entered into a consent and waiver document that allowed Defendant
to file a second lien behind Plaintiff on Borrowers’ debt.
Defendant alleges it was “coerced or forced into executing
[Plaintiff’s] consent and waiver document as a result of
[Plaintiff’s] threats to stop advancing money to Borrower[s].”
Am. Answer at ¶ 105.
According to Plaintiff, Borrowers have been in breach of the
Loan Agreement since August 2013 “for a multitude of reasons,
including . . . failure to pay [Plaintiff] amounts owed when
due.”
Compl. at ¶ 8.
Plaintiff alleges Borrowers, nevertheless,
have made rent payments to Defendant “since August 2013.”
In its
Answer, however, Defendant denies Borrowers made any rent
payments to Defendant after February 2014.
On September 11, 2013, Defendant made a loan (Loan 5) to
Borrowers in the amount of $30,000 to allow Borrowers to file for
reorganization under the United States Bankruptcy Code “in
7 - OPINION AND ORDER
reliance on [the] Debt/Equity Evaluation” conducted by BY&S.
Am.
Answer at ¶ 108.
“In August or September 2013" Plaintiff advised Defendant
that Borrowers’ accounts receivable “had been materially
overstated for more than one year in the Borrowing Base
certificates and financial statements.”
Am. Answer at ¶ 29.
On January 28, 2014, Plaintiff sent a letter to Defendant in
which Plaintiff demanded that Defendant, pursuant to the terms of
the Subordination Agreement, “forward to [Plaintiff] . . .
amounts received from [Borrowers] for rent payments since August
2013 [as well as] . . . any rent payments received from
[Borrowers] in the future until [Plaintiff] notifies [Defendant]
that [Borrowers’] obligations to [Plaintiff] have been paid in
full.”
Compl., Ex. 2 at 2.
Defendant did not send Plaintiff the rent payments from
Borrowers as Plaintiff demanded.
On March 3, 2014, Plaintiff filed a complaint in Multnomah
County Circuit Court alleging claims against Defendant for breach
of contract, breach of the covenant of good faith and fair
dealing, and specific performance.
Defendant removed the matter
to this Court on April 2, 2014, on the basis of diversity
jurisdiction.
On April 9, 2014, Defendant filed an Answer, Affirmative
Defenses, and Counterclaims in which Defendant asserted 23
8 - OPINION AND ORDER
Affirmative Defenses and four Counterclaims against Plaintiff for
breach of duty of care, negligent misrepresentation, fraudulent
misrepresentation, and promissory estoppel.
In response
Plaintiff filed a Motion to Dismiss Defendant’s Counterclaims.
On July 10, 2014, the Court issued an Opinion and Order in
which it granted Plaintiff’s Motion to Dismiss Defendant’s
Counterclaim for breach of a heightened duty of care and
Counterclaim for negligent misrepresentation because Defendant
did not allege facts sufficient to show a special relationship
existed between Plaintiff and Defendant that gave rise to such
causes of action.
The Court also granted Plaintiff’s Motion to
Dismiss Defendant’s Counterclaim for fraud on the ground that
Defendant failed to plead the right-to-rely element of fraud with
the specificity required by Federal Rule of Civil Procedure 9(b).
Finally, the Court granted Plaintiff’s Motion to Dismiss
Defendant’s Counterclaim for promissory estoppel on the ground
that it is more properly brought as an affirmative defense.
The
Court granted Defendant’s leave to file an Amended Answer to cure
the defects set out in its Opinion and Order.
On August 13, 2014, Defendant filed an Amended Answer,
Affirmative Defenses, and Counterclaims in which Defendant
asserted 24 Affirmative Defenses and three Amended Counterclaims
for breach of duty of care, negligent misrepresentation, and
fraudulent misrepresentation.
9 - OPINION AND ORDER
On October 20, 2014, Plaintiff filed a Motion to Dismiss
Defendant’s Amended Counterclaims.
Although the Court previously
set oral argument for November 20, 2014, the Court is now
satisfied oral argument is not necessary.
For the reasons that
follow, the Court GRANTS Plaintiff’s Motion.
STANDARDS
To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as
true, to “state a claim to relief that is
plausible on its face.” [Bell Atlantic v.
Twombly, 550 U.S. 554,] 570, 127 S. Ct. 1955. A
claim has facial plausibility when the plaintiff
pleads factual content that allows the court to
draw the reasonable inference that the defendant
is liable for the misconduct alleged. Id. at 556.
. . . The plausibility standard is not akin to a
“probability requirement,” but it asks for more
than a sheer possibility that a defendant has
acted unlawfully. Ibid. Where a complaint pleads
facts that are “merely consistent with” a
defendant's liability, it “stops short of the line
between possibility and plausibility of
‘entitlement to relief.’” Id. at 557, 127 S. Ct.
1955 (brackets omitted).
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
Atlantic, 550 U.S. at 555-56.
See also Bell
The court must accept as true the
allegations in the complaint and construe them in favor of the
plaintiff.
Din v. Kerry, 718 F.3d 856, 859 (9th Cir. 2013).
The pleading standard under Federal Rule of Civil Procedure
8 “does not require ‘detailed factual allegations,’ but it
demands more than an unadorned, the-defendant-unlawfully-harmed-
10 - OPINION AND ORDER
me accusation.”
U.S. at 555).
Iqbal, 556 U.S. at 678 (quoting Twombly, 550
See also Fed. R. Civ. P. 8(a)(2).
“A pleading
that offers ‘labels and conclusions’ or ‘a formulaic recitation
of the elements of a cause of action will not do.’”
Twombly, 550 U.S. at 555).
Id. (citing
A complaint also does not suffice if
it tenders “naked assertion[s]” devoid of “further factual
enhancement.”
Id. at 557.
"In ruling on a 12(b)(6) motion, a court may generally
consider only allegations contained in the pleadings, exhibits
attached to the complaint, and matters properly subject to
judicial notice."
Akhtar v. Mesa, 698 F.3d 1202, 1212 (9th Cir.
2012)(citation omitted).
A court, however, "may consider a
writing referenced in a complaint but not explicitly incorporated
therein if the complaint relies on the document and its
authenticity is unquestioned."
Swartz v. KPMG LLP, 476 F.3d 756,
763 (9th Cir. 2007)(citation omitted).
DISCUSSION
Plaintiff moves to dismiss Defendant’s Amended Counterclaims
on the grounds that (1) there is not any special relationship
between Plaintiff and Defendant and (2) Defendant failed to plead
sufficiently the right to rely.
11 - OPINION AND ORDER
I.
Defendant’s Amended Counterclaims for Breach of a Heightened
Duty of Care and Negligent Misrepresentation
Plaintiff asserts the Court should dismiss Defendant's first
Amended Counterclaim for breach of a heightened duty of care and
second Amended Counterclaim for negligent misrepresentation
because Defendant still fails to allege facts sufficient to show
a special relationship existed between Plaintiff and Defendant
that gave rise to such causes of action.
Specifically, Plaintiff notes although Defendant has
included several new allegations relating to Defendant’s alleged
inability to conduct its own due diligence, both the Complaint
and the Amended Answer reflect Plaintiff and Defendant entered
into arm's-length business transactions:
the Landlord
Subordination Agreement between Plaintiff, Defendant, and
Borrowers and Loans 4A and 5 between Defendant and Borrowers.
The Complaint and Amended Answer continue to show Plaintiff (as
Borrowers' lender) and Defendant (as Borrowers' landlord) had
competing claims to Borrowers' funds.
Accordingly, Plaintiff
asserts the Lease Subordination Agreement was an ordinary
financial transaction in which Defendant and Plaintiff were
"adversarial parties" who bore the burden of protecting their own
financial interests rather than a transaction in which Plaintiff
had any obligation to pursue or to protect the financial
interests of Defendant.
The Court agrees.
As the Court noted in its July 9, 2014, Opinion and Order,
12 - OPINION AND ORDER
the Oregon Supreme Court held in Bennett v. Farmers Ins. Co. of
Oregon that Oregon law does not impose any tort duty “simply
because one party begins to dominate and control the other
party’s financial future” or because one party “relinquished
control to the other.”
332 Or. 138, 161 (2001).
The Oregon
Supreme Court explained:
The focus is not on the subject matter of the
relationship, such as one party's financial
future; nor is it on whether one party, in fact,
relinquished control to the other. The focus
instead is on whether the nature of the parties'
relationship itself allowed one party to exercise
control in the first party's best interests. In
other words, the law does not imply a tort duty
simply because one party to a business relationship begins to dominate and to control the other
party's financial future. Rather, the law implies
a tort duty only when that relationship is of the
type that, by its nature, allows one party to
exercise judgment on the other party's behalf.
Id. at 161-62 (emphasis in original).
Thus, Defendant’s
additional factual allegations in its Amended Answer do not
change the nature of the parties’ relationship.
They were
entities engaged in an arm’s-length transaction with competing
claims to Borrowers’ funds.
Their relationship, therefore, was
not akin to the special relationships that Oregon courts have
concluded may give rise to claims for negligent misrepresentation
or breach of a heightened duty of care such as relationships
involving attorneys, physicians, principals in an agent
relationship, or trustees.
In fact, Plaintiff and Defendant were
"adversarial parties" who "negotiat[ed] [transactions] at arm's
13 - OPINION AND ORDER
length to further their own economic interests."
Onita, 315 Or.
at 161.
Although Defendant relies on a number of cases involving
claims against attorneys for negligent estate planning to support
its assertion that it has viable Counterclaims for breach of duty
of care and negligent misrepresentation against Plaintiff, the
Court notes Oregon courts in those cases have concluded a
promisor (i.e., the estate attorney) may owe “a duty not only to
the promisee [the decedent] but also to the intended
beneficiary.”
Frakes v. Nay, 254 Or. App. 236, 265 (2012)(citing
Hale v. Groce, 304 Or. 281, 286 (1987)).
Barker, 341 Or 534 (2006).
See also Caba v.
Cases such as these, however, are
distinguishable from the case before this Court.
Each of the
cases cited by Defendant involves claims brought by third-party
beneficiaries against the attorney (the promisor) for failing to
effectuate the decedent’s testamentary intent.
Here the promisor
under Defendant’s third-party beneficiary theory is BY&S rather
than Plaintiff and, as the Court has noted, BY&S is not a party
to this action.
Accordingly, the Court grants Plaintiff's Motion to Dismiss
Defendant's Amended Counterclaims for breach of duty of care and
negligent misrepresentation.
II.
Defendant’s Amended Counterclaim for Fraud
Plaintiff moves to dismiss Defendant’s Amended Counterclaim
14 - OPINION AND ORDER
for fraud on the ground that Defendant fails to plead the rightto-rely element of fraud.
A.
Pleading Standard
Federal Rule of Civil Procedure 8(a) provides:
A
pleading that sets forth a claim must contain "a short and plain
statement of the claim showing the pleader is entitled to
relief."
"Rule 8's liberal notice pleading standard . . .
requires that the allegations” provide the opposing party with
“fair notice of what the . . . claim is and the grounds upon
which it rests."
Tribble v. Raytheon Co., No. 09-56669, 2011 WL
490992, at *1 (9th Cir. Feb. 14, 2011).
With respect to allegations of fraud, however, Federal
Rule of Civil Procedure 9(b) requires all allegations of fraud to
be stated "with particularity."
In order to satisfy the
additional burdens imposed by Rule 9(b), the party must allege at
a minimum "the time, place and nature of the alleged fraudulent
activities."
Tok Cha Kim v. CB Richard Ellis Haw., Inc., 288 F.
App'x 312, 315 (9th Cir. 2008)(citation omitted).
"Rule 9(b)
demands that the circumstances constituting the alleged fraud 'be
specific enough to give [the opposing party] notice of the
particular misconduct . . . so that [it] can defend against the
charge and not just deny that [it has] done anything wrong.'"
Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir.
2009)(quoting Bly-Magee v. Cal., 236 F.3d 1014, 1019 (9th Cir.
15 - OPINION AND ORDER
2001)).
"Averments of fraud must be accompanied by ‘the who,
what, when, where, and how’ of the misconduct charged.”
Id.
(quoting Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th
Cir. 2003)).
"A party alleging fraud must set forth more than
the neutral facts necessary to identify the transaction.”
Id.
(quotation omitted).
B.
Fraud Standard
To state a claim for fraud under Oregon common law a
party must allege:
“(1) a representation; (2) its falsity; (3) its
materiality; (4) the speaker's knowledge of its
falsity or ignorance of its truth; (5) his intent
that it should be acted on by the person and in
the manner reasonably contemplated; (6) the
hearer's ignorance of its falsity; (7) his
reliance on its truth; (8) his right to rely
thereon; and (9) his consequent and proximate
injury.”
Burgdorf v. Weston, 259 Or. App. 755, 771 (2013)(quoting Webb v.
Clark, 274 Or. 387, 391 (1976)).
C.
Analysis
In its Amended Counterclaim for fraud Defendant
incorporates by reference the allegations contained in its
Amended Counterclaims for breach of duty of care and negligent
misrepresentation.
Defendant asserts:
“In the alternative,
[Plaintiff] knowingly and/or recklessly made the material
misrepresentations and omissions referenced in the preceding
count [of negligent misrepresentation].”
16 - OPINION AND ORDER
Am. Answer at ¶ 148.
Specifically, Defendant alleges Plaintiff (acting through BY&S)
knowingly or recklessly misrepresented Borrowers’ financial state
thereby causing Defendant to enter into the Lease Subordination
Agreement with Borrowers and into Loans 4A and 5 with Borrowers.
As noted, Plaintiff moves to dismiss Defendant’s Amended
Counterclaim for fraud on the ground that Defendant fails to
plead the right-to-rely element of fraud with the required
specificity.
See Vasquez- Lopez v. Beneficial Or., Inc., 210 Or.
App. 553, 580 (2007)(“Under Oregon law, a party asserting fraud
must prove by clear and convincing evidence not only that it
relied on the other party's misrepresentation, but that the
reliance was reasonable under the circumstances.”).
Defendant contends it was unable to understand
Borrowers’ financial strength before it entered into Loans 4A and
5, and, therefore, it had to rely on what Plaintiff and/or BY&S
said about Borrowers’ financial condition.
As this Court noted
in its July 9, 2014, Opinion and Order, however, a business such
as Defendant cannot fail to conduct due diligence before entering
into an arm’s-length business transaction and then bring a claim
for fraud against the other party to the transaction for
allegedly misrepresenting facts that the sophisticated business
could and should have discovered on its own.
The allegations in Defendant’s Amended Answer establish
before Defendant entered into Loans 4A and 5:
17 - OPINION AND ORDER
Defendant was Borrowers’ lender and landlord.
Answer at ¶¶ 4, 71.
Am.
Defendant had access to Borrowers’ financial
records. Am. Answer at ¶¶ 87, 92, 107.
Defendant hired an accountant to help it analyze
Borrowers’ financial status. Am. Answer at ¶¶ 92,
107.
At least one of Defendant’s members was on
Borrowers’ Board of Directors. Am. Answer at
¶ 75(a).
At least one of Defendant’s members was given full
access to Borrowers’ financial information. Am.
Answer at ¶ 87.
Defendant knew Borrowers had defaulted on the Loan
and Security Agreement with Plaintiff and that
Borrowers were having financial difficulty. Am.
Answer at ¶¶ 50, 107, 108.
Defendant, therefore, had access to Borrowers’ financial records,
had the services of a professional accountant to analyze them,
knew Borrowers were in financial trouble, and at least knew or
should have known it did not have a sufficient understanding of
Borrowers’ finances to enter confidently into an agreement to
lend them money.
In light of these facts as alleged by
Defendant, “it is clear that [Defendant] had sufficient resources
at its disposal to detect any existing liabilities [P]laintiff[]
had not disclosed.”
See Vasquez-Lopez, 210 Or. App. at 581.
Thus, Defendant has not established it had the right to rely on
the representations of Plaintiff or BY&S as to Borrowers’
financial condition before entering into Loans 4A and 5.
Accordingly, the Court concludes Defendant has not sufficiently
18 - OPINION AND ORDER
pled the elements of a Counterclaim for fraud.
In summary, the pleadings reflect Plaintiff and
Defendant were businesses engaged in an arm’s-length
relationship, and Defendant has not alleged facts from which the
Court can conclude Defendant has sufficiently pled the right to
rely on Plaintiff’s statements.
Accordingly, the Court grants Plaintiff’s Motion to
Dismiss Defendant’s Amended Counterclaim for fraud.
CONCLUSION
For these reasons, the Court GRANTS Plaintiff’s Motion (#40)
to Dismiss HNC Properties, LLC’s Amended Counterclaims.
IT IS SO ORDERED.
DATED this 6th day of November, 2014.
/s/ Anna J. Brown
ANNA J. BROWN
United States District Judge
19 - OPINION AND ORDER
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