WEST RUN STUDENT HOUSING ASSOCIATES, LLC et al v. HUNTINGTON NATIONAL BANK
Filing
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MEMORANDUM OPINION AND ORDER OF COURT granting in part and denying in part 22 Motion to Strike. Plaintiffs shall file a Second Amended Complaint on or before August 19, 2013 consistent with the foregoing Memorandum Opinion and this Order of Court. Signed by Judge Terrence F. McVerry on 08/05/13. (mcp)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
WEST RUN STUDENT HOUSING
ASSOCIATES, LLC; CAMPUS VIEW JMU,
LLC; and MT. TABOR VILLAGE, LLC
Plaintiffs,
v.
HUNTINGTON NATIONAL BANK,
Defendant.
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MEMORANDUM OPINION AND ORDER OF COURT
Before the Court is a MOTION TO STRIKE PORTIONS OF AMENDED COMPLAINT
(ECF No. 22) filed by Defendant Huntington National Bank (“Huntington”) with brief in support
(ECF No. 23). Plaintiffs Campus View JMU, LLC, and Mt. Tabor Village, LLC filed a brief in
opposition (ECF No. 26);
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Huntington filed a reply brief (ECF No. 27). Accordingly, the
motion is ripe for disputation.
I.
Background
The parties, counsel, and the Court are familiar with the background of this case and,
therefore, the Court will not recite the facts at length. The following is a brief recitation of the
procedural history relevant to the issues presently before the Court.
Plaintiffs initiated this lawsuit on or about December 22, 2011 by filing a three-count
Verified Complaint in the Court of Common Pleas of Allegheny County, Pennsylvania. At
Count One, Plaintiff West Run alleged that Huntington breached its duty of good faith and fair
1. All parties retain West Run Student Housing Associates, LLC (“West Run) as a named Plaintiff in the caption
and treat it as a moving party. As discussed in greater detail below, the United States Court of Appeals for the Third
Circuit upheld the dismissal of both counts brought by West Run against Huntington in the Amended Complaint.
Therefore, in the absence of any other pleadings filed of record, West Run is no longer a party to this action and the
caption will be amended accordingly.
dealing by participating in the financing of a nearby student housing construction project which
caused the failure of the West Run project. At Counts Two and Three, both Campus View and
Mt. Tabor Village each alleged breach of contract based on Huntington’s failure to honor certain
construction draws under the respective construction loan agreements.
Huntington removed the lawsuit to this Court on January 20, 2012 and filed a Motion to
Dismiss all claims one week later.
Huntington argued that West Run’s claims should be
dismissed for failure to state a plausible claim and that the claims of Campus View and Mt.
Tabor Village should be dismissed on the basis that their own admissions established that they
had not fulfilled certain unit pre-sale(s) requirements, which relieved Huntington from any
further funding obligations.2
Plaintiffs did not contest Huntington’s motion to dismiss, but instead filed an Amended
Complaint on February 28, 2012. The Amended Complaint omitted factual allegations contained
in the original Complaint regarding the failure of Campus View and Mt. Tabor Village to fulfill
their unit pre-sale(s) requirements and included a new count (“Count One”) in which West Run
averred that Huntington had breached its duty of good faith and fair dealing in allegedly having
disclosed confidential information to other developers.
The Amended Complaint also
renumbered the original three counts as Counts Two, Three, and Four.
Huntington filed a Motion to Dismiss the Amended Complaint on March 16, 2012. Once
again, Huntington argued that West Run’s pleadings contained insufficient factual support to
state a plausible claim. As to the claims of Campus View and Mt. Tabor Village, Huntington
argued that those claims should have been dismissed based on “their own admissions as to the
pre-sale(s) deficiencies” contained in the original Complaint.
2. The original Complaint averred that Campus View had pre-sold thirty-six units and Mt. Tabor pre-sold twentyseven units. The loan agreements, however, required Mt. Tabor to sell twenty-nine units and Campus View to sell at
least fifty-four units before Huntington was required to fund the entire projects.
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Plaintiffs responded that West Run’s claims as pled met the plausibility standard and that
Defendant’s request to dismiss the claims of Campus View and Mt. Tabor Village “based on
allegations found in the original complaint, which are absent from the amended complaint, is
untenable.”
This Court granted Huntington’s motion on May 15, 2012 and dismissed the Amended
Complaint in its entirety with prejudice. To summarize, the Court found (1) that little more than
unsupported conclusions and unwarranted inferences were pled in support of Count One; (2) that
the absence of restrictive language in the lending agreement between the parties was fatal to
Count Two; and (3) that the inclusion of the pre-sale(s) references in the verified original
Complaint were binding judicial omissions and the deletion of those figures at Counts Three and
Four in the Amended Complaint was simply an attempt to avoid dismissal. Plaintiffs’ appeal
followed.
The United States Court of Appeals for the Third Circuit affirmed in part and reversed in
part in a precedential opinion issued on April 4, 2013. See W. Run Student Hous. Associates,
LLC v. Huntington Nat. Bank, 712 F.3d 165 (3d Cir. 2013). The court of appeals first agreed
with this Court’s determination that West Run “alleged insufficient facts to support the
conclusion that Huntington provided any proprietary information regarding the West Run Project
to the [competing] developers.” Id. at 169. The court of appeals similarly upheld this Court’s
dismissal of Count Two, concluding that “the implied duty of good faith and fair dealing did not
extend as far as Plaintiffs suggest.” Id. at 170. The court of appeals did, however, hold that this
Court erred in dismissing Counts Three and Four “given the procedural posture of the case.” Id.
at 171. As the court of appeals explained, Plaintiffs could not be bound to the allegations in the
superseded Complaint because they were permitted to amend their original pleading to cure a
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purported factual mistake, to withdraw judicial admissions that were previously made, and to
correct inadequacies in response to a motion to dismiss. See id. at 171-73. Accordingly, the
court of appeals vacated and remanded with respect to Counts Three and Four so that this Court
“[could] give Plaintiffs a chance to provide evidence showing that the pre-sale numbers in the
original complaint were incorrect (as they now claim) and that the real numbers meet the
contractual requirements.” Id. at 173; see also id. at n.4.
Shortly after the mandate of the court of appeals was docketed, Huntington filed its
Answer to Counts Three and Four and a Motion to Strike portions of the Amended Complaint.
Defendants partially oppose the motion to strike to which the Court now turns.
II.
Standard of Review
Federal Rule of Civil Procedure 12(f) provides that “[t]he court may strike from a
pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous
matter.” “‘The purpose of a motion to strike is to clean up the pleadings, streamline litigation,
and avoid unnecessary forays into immaterial matters.’”
Goode v. LexisNexis Risk &
Information Analytics Group, Inc., 284 F.R.D. 238, 243-44 (E.D. Pa. 2012) (quoting McInerney
v. Moyer Lumber & Hardware, Inc., 244 F. Supp. 2d 393 (E.D. Pa. 2002)). Relief under Rule
12(f) is generally disfavored and will be denied unless the allegations “have no possible relation
to the controversy and may cause prejudice to one of the parties, or if the allegations confuse the
issues in the case.” Id. at 243 (citation and quotation marks omitted). (citations omitted).
III.
Discussion
Huntington moves the Court to strike Plaintiffs’ jury trial demand, their claim for
consequential damages, punitive damages, and attorneys’ fees, and all allegations regarding West
Run. The Court will address said requests seriatim.
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A. Jury Trial Demand
Huntington submits that the Court should strike Plaintiff’s jury trial demand because they
knowingly and voluntarily waived that right in the loan documents they now claim Defendant
breached. See ECF No. 23-2 (Campus View contract); ECF No. 23-1 (Mt. Tabor contract). Not
surprisingly, Defendants oppose this request.
The right to a jury trial in a civil case is a fundamental right and courts indulge every
reasonable presumption against waiver. Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212,
222 (3d Cir. 2007) (citing Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 393 (1937); Bouriez v.
Carnegie Mellon Univ., 359 F.3d 292 (3d Cir. 2004); Collins v. Gov’t of Virgin Islands, 366 F.2d
279 (3d Cir. 1966)). Nonetheless, as with other constitutional rights, private litigants may waive
the right to a jury trial in a civil case. Id. (citations omitted).
“To be valid, a jury waiver must be made knowingly and voluntarily based on the facts of
the case.” Id. (citations omitted). See also Triboro, Inc. v. Siren, Inc., CIV.05 997 WHW, 2006
WL 2990365, at *6 (D.N.J. Oct. 18, 2006) (“The validity of jury waivers in diversity cases is
governed by federal law.”) (citing Simler v. Connor, 372 U.S. 221, 222 (1963)). A contractual
waiver is knowing and voluntary when the facts show that (1) there was no gross disparity in
bargaining power between the parties; (2) the parties are sophisticated business entities; (3) the
parties had an opportunity to negotiate the contract terms; and (4) the waiver provision was
conspicuous. First Union National Bank v. United States of America, 164 F.Supp.2d 660, 663
(E.D. Pa. 2001). The burden of proving a knowingly and voluntarily waiver falls on the party
seeking enforcement of the contractual clause. Henricks Commerce Park, LLC v. Main Steel
Polishing Co., Inc., CIV A 09-23, 2009 WL 2524348, at *3 (W.D. Pa. Aug. 18, 2009); see also
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Bishop v. GNC Franchising, LLC., 05CV0827, 2006 WL 2266251, at *1 (W.D. Pa. Jan. 13,
2006) (discussing the burden of proving a waiver of the right to a jury trial).
Here, the parties dispute the applicability of the initial three factors. Huntington focuses
its attention on the first factor, submitting that Plaintiffs’ statements regarding the gross disparity
in bargaining power are self-serving, ungrounded in factual support, and contradicted by their
own allegations. To support its position, Huntington contends that “[c]ourts have stricken jury
demands in similar cases.” ECF No. 27 at 2-3 (citing Weed v. Ally Fin. Inc., CIV.A. 11-2808,
2011 WL 4482118 (E.D. Pa. Sept. 27, 2011); Bishop, 2006 WL 2266251). Turning to the
second and third factors, Huntington pivots away from that theory and asks the Court to accept
other allegations as true when they conveniently support its position. See ECF No. 27 at 3
(“Plaintiffs allegations establish that they were operated by sophisticated sponsors . . . [and] also
establish that at least some portion of the agreements was negotiated.”); see also id. at 3 n.2
(indicating that the Plaintiffs were operated by sophisticated sponsors because “Russell, P. Mills,
the sponsor that verified the Amended Complaint, is an attorney that concentrates his practice, in
part, on real property transactions) (citing Russell P. Mills Attorney Profile, MILLS & HENRY
ATTORNEYS
AT
LAW, http://millshenry.com/rpm.html (last visited July 22, 2013). Defendants
generally argue that Huntington, as the party seeking enforcement of the clause, has not and
cannot satisfy its burden of proof because the uncontroverted factual averments in the Amended
Complaint set forth allegations that run afoul of the first three factors. Thus, as Defendants
somehow conclude, the waivers are therefore ineffective.
At this juncture, the Court is unable to meaningfully analyze the disputed factors given
the dearth of evidence on either side of this issue. The only background information properly
before the Court regarding the relative bargaining power between the parties, the sophistication
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of the business entities, or the extent to which the parties negotiated the terms are the unadorned
assertions in the Amended Complaint that unsurprisingly tend to favor the position now
advanced by Plaintiffs. When those conclusory averments are set aside, the facts indicate that
Plaintiffs were competent entities that freely chose a lender to finance their multimillion dollar
projects from among numerous competitors, engaged in some negotiations, and agreed to certain
terms expressly set forth in the contracts, including the jury trial waiver.
Should the discovery process confirm these suspicions, the Court may indeed revisit this
issue. See Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212, 226-27 (3d Cir. 2007) (““Since
a court has the power to act sua sponte at any time under Rule 39, it follows that a court has the
discretion to permit a motion to strike a jury demand at any time, even on the eve of trial.”)
(citation and quotation marks omitted). The Court will not, however, rely upon a disfavored
procedural mechanism to strike a fundamental and constitutionally protected right at this early
stage of the proceeding without proper factual support from Huntigton.3 Therefore, the Court
will deny the motion strike the jury demand without prejudice.
B. Prayer for Punitive Damages & Attorneys’ Fees
Huntington also moves the Court to strike Plaintiffs’ prayer for punitive damages and
attorneys’ fees. Plaintiffs do not oppose these requests. Accordingly, the Court will strike all
references to punitive damages and attorneys’ fees from the ad damnum clauses in the Amended
Complaint.
3. Huntington’s citation to Weed and Bishop may be instructive. In Weed, the court found that no gross disparity
existed based upon evidence of plaintiffs’ eighty-two year track record of successful business dealings with the
defendant. 2011 WL 4482118, at *5. In Bishop, the court noted the educational and professional background of the
plaintiffs based upon record evidence. Although Huntington attempts to satisfy the “sophistication” prong by noting
the background of one sponsor (i.e., Mills) and citing to his law firm’s website, the Court gives minimal weight to
that extraneous material as presented.
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C. Prayer for Consequential Damages
Huntington asks the Court to strike Plaintiffs’ prayer for consequential damages because
Plaintiffs purportedly disclaimed their ability to recover such damages in the operative loan
documents. Plaintiffs again highlight their perceived inferior bargaining power, arguing that the
inequalities among the parties should void the contractual waiver.
Pennsylvania law permits parties of equal bargaining power to contractually limit their
liability for consequential damages. See Philips-Van Heusen Corp. v. Mitsui O.S.K. Lines Ltd.,
CIV.A. 1:CV-00-0665, 2002 WL 32348263, at *13 (M.D. Pa. Aug. 14, 2002) (citations omitted).
“Such limitations on liability will be enforced absent a showing that the breaching party engaged
in willful or wanton conduct.” Id. (citation omitted).
Much like the earlier waiver issue, the Court finds that it is premature at this early
juncture to dismiss Plaintiffs’ claim for consequential damages without discovery having
occurred. Discovery may certainly reveal that the limitation is enforceable, and Huntington may
undoubtedly raise this issue again at the summary judgment stage of this case. Therefore, the
Court will dismiss this request without prejudice.
D. Allegations Relating to the Dismissal of West Run
Huntington asks the Court to strike all allegations supporting or relating to the two nowdismissed counts brought by West Run because they are no longer material to this litigation. See
ECF No. 27 at 4-5 (listing the paragraphs it moves the Court to strike). Plaintiffs oppose this
request and submit that some of those allegations have an impact on the remaining controversy.
See, e.g., ECF No. 26 at 5 (“Coupled with the allegations of paragraphs 42 and 51, that there was
overlap among the sponsors of the three projects, [Paragraph 25] is relevant to show that the
sponsors were competent and unlikely to cause loan defaults.”). The Court does not agree.
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The Amended Complaint sets forth a significant number of allegations that relate to West
Run and the two now-dismissed counts brought on its behalf—averments that only unnecessarily
confuse the two remaining issues and lengthen the pleading. Excising those paragraphs in whole
or in part that reference West Run Student Housing, LLC or the West Run Student Housing
Project would effectuate the purpose of Rule 12(f) by streamlining this litigation and avoiding
unnecessary forays into immaterial matters. See ECF No. 10 at “Introduction”; ¶¶ 1, 5-41, 4244, 46, 59, 67, 68, 72-73, 81-82, 84, 90-91. Similarly, amending those references that group the
three projects together would also surely “clean up” the pleadings. See ECF No. 10 at ¶¶ 55, 57,
58.4
Accordingly, the Court will grant the motion to strike all references to West Run Student
Housing Associates, LLC and all allegations concerning the West Run Student Housing Project
in Morgantown, West Virginia. Plaintiffs will be directed to file a Second Amended Complaint
consistent with this Memorandum Opinion.
IV.
Conclusion
For the reasons hereinabove stated, the Court will grant in part and deny in part the
MOTION TO STRIKE PORTIONS OF AMENDED COMPLAINT. An appropriate Order
follows.
McVerry, J.
4. The Court also notes the observation of the court of appeals regarding “James Mason University” and the
likelihood that James Madison University should be the institution referenced. See W. Run Student Hous.
Associates, LLC v. Huntington Nat. Bank, 712 F.3d 165, 167 n.1 (3d Cir. 2013).
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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
WEST RUN STUDENT HOUSING
ASSOCIATES, LLC; CAMPUS VIEW JMU,
LLC; and MT. TABOR VILLAGE, LLC
Plaintiffs,
v.
HUNTINGTON NATIONAL BANK,
Defendant.
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ORDER OF COURT
AND NOW, this 5th day of August, 2013, in accordance with the foregoing
Memorandum Opinion, it is hereby ORDERED, ADJUDGED and DECREED that the
MOTION TO STRIKE PORTIONS OF AMENDED COMPLAINT (ECF No. 22) filed by
Defendant Huntington National Bank is GRANTED IN PART and DENIED IN PART as
follows: (1) the Motion to Strike the jury trial demand is DENIED WITHOUT PREJUDICE;
(2) the Motion to Strike the prayer for punitive damages and attorneys’ fees is GRANTED and
same are STRICKEN; (3) the Motion to Strike the prayer for consequential damages is
DENIED WITHOUT PREJUDICE; and (4) the Motion to Strike all references to West Run
Student Housing Associates, LLC and all allegations concerning the West Run Student Housing
Project in Morgantown, West Virginia is GRANTED and the same are STRICKEN.
The caption is amended to hereafter read as follows:
CAMPUS VIEW JMU, LLC; and MT. TABOR
VILLAGE, LLC
Plaintiffs,
v.
HUNTINGTON NATIONAL BANK,
Defendant.
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IT IS FURTHER ORDERED that Plaintiffs shall file a Second Amended Complaint on
or before August 19, 2013 consistent with the foregoing Memorandum Opinion and this Order of
Court.
BY THE COURT:
s/Terrence F. McVerry
United States District Judge
cc:
Robert O. Lampl
Email: rol@lampllaw.com
Peter S. Russ
Email: peter.russ@bipc.com
Kathleen J. Goldman
Email: kathleen.goldman@bipc.com
Renee M. Schwerdt
Email: renee.schwerdt@bipc.com
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