Eastbourne Arlington One, LP v. JPMorgan Chase Bank, National Association
Filing
38
ORDER GRANTING MOTION TO DISMISS denying 36 Motion ; denying 17 Motion ; granting 21 Motion to Dismiss... All claims in this cause that Eastbourne has asserted against JPMorgan are DISMISSED WITH PREJUDICE. See Order for further specifics. (Ordered by Judge Terry R Means on 7/27/2011) (krg)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
EASTBOURNE ARLINGTON ONE, LP
VS.
JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION
§
§
§
§
§
§
CIVIL ACTION NO. 4:10-CV-948-Y
ORDER GRANTING MOTION TO DISMISS
Before the Court is the Motion to Dismiss (doc. 21) filed by
defendant JPMorgan Chase Bank, National Association (“JPMorgan”).
By the motion, JPMorgan seeks dismissal of the amended complaint of
plaintiff Eastbourne Arlington One, LP (“Eastbourne”), pursuant to
Federal Rule of Civil Procedure 12(b)(6).
After review, the Court
will grant JPMorgan’s motion.
I.
Background
On October 25, 2007, Washington Mutual Bank (“Washington
Mutual”) entered into a lease agreement with Eastbourne (“the
lease”), under which Eastbourne leased certain real property in
Tarrant County, Texas (“the lease property”), to Washington Mutual
for use as a future branch office.
(Am. Compl. 2-3, ¶ 6 (doc.
16).) Before Washington Mutual ever occupied any facilities on the
lease property, however, on September 25, 2008, the Office of
Thrift
Supervision
declared
Washington
Mutual
insolvent
and
appointed the Federal Deposit Insurance Corporation (“FDIC”) as
Washington Mutual’s receiver pursuant to the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”).
(Id. at
3, ¶ 7; 6, ¶ 16.)
That same day, the FDIC entered into a Purchase and Assumption
Agreement (“PAA”) with JPMorgan, by which the FDIC transferred to
JPMorgan a substantial number of Washington Mutual’s assets and
liabilities.1
(Id. at 3, ¶ 8.)
The PAA excluded from the transfer
all assets that constituted “leased Bank Premises.”
(Id. at 4, ¶
12.) With respect to “leased Bank Premises,” the PAA gave JPMorgan
a 90-day option period to assume or reject them.
defined
“Bank
Premises”
as
“banking
The PAA
drive-in
houses,
(Id.)
banking
facilities and teller facilities . . . that are owned or leased by
[Washington Mutual] and that are occupied by [Washington Mutual] as
of Bank Closing,” which was September 25, 2008.
(Id. at 5, ¶ 13.)
In contrast, all assets constituting “Other Real Estate” were
automatically transferred to JPMorgan under the PAA.
(Id. at 5, ¶
15.)
JPMorgan,
taking
the
position
that
the
lease
property
constitutes “leased Bank Premises,” has refused to pay rent to
Eastbourne under the lease.
(Id. at 7, ¶ 20.)
Eastbourne,
therefore, filed the instant lawsuit against JPMorgan on December
8, 2010, and later amended its complaint on February 15, 2011. The
amended complaint asserts state-law claims against JPMorgan for
1
Eastbourne alleges that JPMorgan had attempted to acquire all of
Washington Mutual’s assets just five months prior to the FDIC transfer. (Am.
Compl. 3, ¶ 9.)
2
breach, abandonment, and repudiation of the lease.2
¶¶ 21-23.)
(Id. at 7-8,
JPMorgan now seeks dismissal of Eastbourne’s amended
complaint under Rule 12(b)(6).
II.
Legal Standard
Federal
Rule
of
Civil
Procedure
12(b)(6)
authorizes
the
dismissal of a complaint that fails “to state a claim upon which
relief
can
be
granted.”
This
rule
must
be
interpreted
in
conjunction with Rule 8(a), which sets forth the requirements for
pleading a claim for relief in federal court.
Rule 8(a) calls for
“a short and plain statement of the claim showing that the pleader
is entitled to relief.”
Fed. R. Civ. P. 8(a)(2); see Swierkiewicz
v. Sorema N.A., 534 U.S. 506, 508 (2002) (holding that Rule 8(a)’s
simplified pleading standard applies to most civil actions).
Court
must
accept
as
true
all
well-pleaded,
The
non-conclusory
allegations in the complaint and liberally construe the complaint
in favor of the plaintiff.
Kaiser Aluminum & Chem. Sales, Inc. v.
Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982).
The plaintiff must, however, plead specific facts, not mere
conclusory allegations, to avoid dismissal.
LaPlace, 954 F.2d 278, 281 (5th Cir. 1992).
Guidry v. Bank of
Indeed, the plaintiff
must plead “enough facts to state a claim to relief that is
plausible on its face,” and his “[f]actual allegations must be
2
The Court has diversity jurisdiction over this action.
§ 1332 (West 2011).
3
See 28 U.S.C.A.
enough to raise a right to relief above the speculative level, on
the assumption that all the allegations in the complaint are true
(even if doubtful in fact).”
Bell Atl. Corp. v. Twombly, 550 U.S.
544, 547, 555 (2007) (citations omitted).
The Court need not
credit bare conclusory allegations or “a formulaic recitation of
the elements of a cause of action.”
Id. at 1955.
Rather, “[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.” Ashcroft v.
Iqbal, 129 S. Ct. 1937, 1949 (2009).
“Generally, a court ruling on a motion to dismiss may rely on
only
the
complaint
and
its
proper
attachments.
A
court
is
permitted, however, to rely on documents incorporated into the
complaint by reference, and matters of which a court may take
judicial notice.”
Dorsey v. Portfolio Equities, Inc., 540 F.3d
333, 338 (5th Cir. 2008) (citations omitted) (internal quotation
marks
omitted).
“A
written
document
that
is
attached
to
a
complaint as an exhibit is considered part of the complaint and may
be considered in a 12(b)(6) dismissal proceeding.”
Ferrer v.
Chevron Corp., 484 F.3d 776, (5th Cir. 2007) (footnote omitted).
III. Discussion
A.
Eastbourne’s Requests for Judicial Notice
As a preliminary matter, Eastbourne asks the Court to take
judicial notice of a number of documents, ranging from court
4
records to a Wall Street Journal article. Federal Rule of Evidence
201
authorizes
the
Court
to
“take
judicial
notice
of
an
‘adjudicative fact’ if the fact is ‘not subject to reasonable
dispute in that it is either (1) generally known within the
territorial jurisdiction of the trial court or (2) capable of
accurate
and
ready
determination
by
resort
to
sources
whose
accuracy cannot be questioned.’” Taylor v. Charter Med. Corp., 162
F.3d 827, 829 (5th Cir. 1998) (quoting Fed. R. Evid. 201(b)).
With regard to the court records, “a court may take judicial
notice of a ‘document filed in another court to establish the fact
of such litigation and related filings,’ but [generally] ‘cannot
take notice of the factual findings of another court.’” SB Int’l,
Inc. v. Jindal, No. 3:06-CV-1174-G, 2007 WL 1411042, at *1 (N.D.
Tex. May 14, 2007) (Fish, C.J.) (quoting Taylor, 162 F.3d at 829).
This is because a court’s findings are almost always subject to
reasonable dispute.
See Taylor, 162 F.3d at 30.
It is unclear for what purpose Eastbourne is offering the
court records--that is, whether Eastbourne is offering them to
establish the fact of their having been filed or to establish the
facts asserted therein.
But for the court records to have any
relevance to the instant case, Eastbourne must be offering them for
their contents.
Most of the assertions in the court records,
however, are not adjudicative facts (e.g., legal determinations),
and those that are adjudicative facts are subject to reasonable
dispute.
See Taylor, 162 F.3d at 830-31.
5
Therefore, the Court
will not take judicial notice of the court records.
Eastbourne asks the Court to take judicial notice of the Wall
Street
Journal
[JPMorgan’s]
article
attempts
April/May, 2008.”
to
because
it
purportedly
purchase
Washington
“documents
Mutual
Bank
in
(Pl.’s Req. for Judicial Notice 3 (doc. 17).)
But the Court cannot take judicial notice of the article because
its contents are subject to reasonable dispute.
See Fed. R. Evid.
201(b).
Moreover, the statements within the article constitute
hearsay.
See James v. Tex. Collin Cnty., 535 F.3d 365, 374 (5th
Cir. 2008).
Eastbourne also asks the Court to take judicial notice of an
order issued by the United States District Court for the Southern
District of Texas.
But for the same reasons the Court cannot take
judicial notice of the aforementioned court records, it cannot take
notice of another court’s findings. See Ferguson v. Extraco Mortg.
Co., 264 F. App’x 351, 352 (5th Cir. 2007) (noting that a district
court “generally cannot take notice of the findings of fact from
other proceedings because those facts are usually disputed and
almost always disputable” (citing Taylor, 162 F.3d at 830)). Thus,
in light of the foregoing, Eastbourne’s requests for judicial
notice (docs. 17, 36) are DENIED.
B.
JPMorgan’s Motion to Dismiss
Turning to JPMorgan’s motion to dismiss, the initial inquiry
before the Court is whether Eastbourne has standing to sue JPMorgan
under the lease.
See Gale v. Garnrite, 559 F.3d 359, 362 (5th Cir.
6
2009) (noting that standing is “a threshold matter”).
Under Texas
law, to establish standing to sue for “damages flowing from the
breach of a written agreement, there must ordinarily be a privity
existing between the party damaged and the party sought to be held
liable for the repudiation of the agreement.”
Vara-Portofino Tech
Ctr. L.L.C. v. Sandvik, No. H-09-2376, 2009 WL 4263975, at *4 (S.D.
Tex. Nov. 25, 2009) (quoting Boy Scouts of Am. v. Responsive
Terminal Sys., Inc., 790 S.W.2d 738, 747 (Tex. App.--Dallas 1990,
writ denied) (internal quotation marks omitted)).3
In its amended complaint, Eastbourne asserts that both privity
of
contract
JPMorgan.
and
privity
Specifically,
of
estate
Eastbourne
exist
between
contends
that
itself
the
and
lease
property constitutes “Other Real Estate” as defined in the PAA and
that, consequently, the lease was automatically transferred to
JPMorgan when the PAA was executed. This, according to Eastbourne,
created privity of contract and privity of estate between itself
and JPMorgan under the lease.4
JPMorgan, in its motion to dismiss, contends that Eastbourne
is a “stranger” to the PAA and that, as a result, Eastbourne lacks
standing to interpret or enforce the PAA’s terms. (Def.’s Br. 3.)
JPMorgan
further
contends
that,
even
assuming
Eastbourne
is
3
Both parties apply Texas law in their briefing, and the Court is content
to do so as well--especially considering that Texas is the forum state.
4
Eastbourne’s position is that the lease property was not “Bank Premises”
within the meaning of the PAA because JPMorgan did not occupy the lease property
on the date the PAA was executed.
7
permitted to offer its interpretation of the PAA, the Court should
reject Eastbourne’s interpretation as incorrect.
According to
JPMorgan, it never became a party to the lease because the lease
property constitutes “leased Bank Premises,” which it could, and
did,
reject--not
automatically
JPMorgan
been
contends
“Other
Real
transferred
that
Estate,”
under
section
3.3
which
the
of
PAA.
the
PAA
would
In
have
addition,
requires
the
execution of a separate document to effect a transfer of the lease
and that no such document was ever executed.5
In
its
response,
Eastbourne
insists
that
it
should
be
permitted to offer its interpretation of the PAA to show that
JPMorgan assumed the lease from the FDIC.6
Otherwise, Eastbourne
contends, JPMorgan will be free to “‘interpret’ the PAA contrary to
its terms to the detriment of any third party who is affected by
it.
(Pl.’s Resp. 4.)
In addition, as an alternative theory for
establishing standing to enforce the PAA, Eastbourne claims that it
5
Section 3.3 states,
Manner of Conveyance; Limited Warranty; Nonrecourse; Etc. The
conveyance of all assets, including real and personal property
interests, purhased by the assuming bank under this agreement[,]
shall be made, as necessary, by receiver’s deed or receiver’s bill
of sale, “as is[,”] “where is[,”] without recourse[,] and, except as
otherwise specifically provided in this agreement, without any
warranties whatsoever with respect to such assets, express or
implied, with respect to title, enforceability, collectibility,
documentation[,] or freedom from liens or encumbrances (in whole or
in part), or any other matters.
(Def.’s App. 101.)
6
Similarly, Eastbourne contends that it has standing to assert the
parole-evidence rule to prevent JPMorgan from introducing extrinsic evidence in
support of its proposed construction of the PAA’s terms.
8
is a third-party beneficiary of the PAA “because the PAA directly
affects [it]s rights and interests.”
(Pl.’s Resp. 18.)
JPMorgan
replies that section 13.5 of the PAA expressly disclaims the
presence of any intention to benefit third parties. See infra note
7.
Eastbourne’s
sole
theory
for
establishing
privity
with
JPMorgan under the lease depends on its interpretation of the PAA,
a contract between the FDIC and JPMorgan.
Thus, before Eastbourne
can establish privity with JPMorgan under the lease, Eastbourne
must show either that has privity with JPMorgan through the PAA or
that it is a third-party beneficiary of the PAA.
See Resolution
Trust Corp. v. Kemp, 951 F.2d 657, 662 (5th Cir. 1992) (“Under
Texas
law,
only
actual
parties
to
a
contract
or
intended
third-party beneficiaries can claim the benefit of a contract.”
(citations omitted)). And because Eastbourne is not a party to the
PAA, its only hope is the latter.
In
Texas,
“[a]
contract
creates
a
third-party
creditor
beneficiary only if the signatories (1) intended to confer a
benefit on that third-party and (2) entered the contract to confer
that benefit on the third party. The language of the contract must
be clear, and the intent of the contracting parties controls.”
In
re Moose Oil & Gas Co., 613 F.3d 521, 527 (5th Cir. 2010) (citing
MCI Telecomm. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 651
(Tex. 1999)).
Moroever, “[a] presumption exists that parties
contracted for themselves unless it clearly appears that they
9
intended a third party to benefit from the contract.” Id. (quoting
MCI
Telecomm.,
995
S.W.2d
at
651
(internal
quotation
marks
omitted)).
In the PAA, not only is there an absence of language showing
that the FDIC and JPMorgan intended to benefit Eastbourne, there is
language in the PAA expressly disclaiming any such intention.7
(Def.’s App. 121.)8
Consequently, Eastbourne is a stranger to the
PAA and cannot enforce its terms.
See Kemp, 951 F.2d at 662
(declining to allow property purchasers to claim the benefit of a
subordination
agreement
between
two
lienholders
because
the
purchasers were neither parties nor intended beneficiaries of the
agreement).
7
As a result, Eastbourne, in turn, cannot establish
Section 13.5 of the PAA reads as follows:
All terms and conditions of this Agreement shall be binding on the
successors and assigns of the Receiver, the Corporation[,] and the
Assuming Bank. Except as otherwise specifically provided in this
Agreement, nothing expressed or referred to in this Agreement is
intended or shall be construed to give any Person other than the
Receiver, the Corporation[,] and the Assuming Bank any legal or
equitable right, remedy[,] or claim under or with respect to this
Agreement or any provisions contained herein, it being the intention
of the parties hereto that this Agreement, the obligations and
statements of responsibilities hereunder, and all other conditions
and provisions hereof are for the sole and exclusive benefit of the
Receiver, the Corporation[,] and the Assuming Bank and for the
benefit of no other person.
(Def.’s App. 121 (emphasis added).)
8
Eastbourne contends that it is a creditor beneficiary pursuant to this
clause in section 13.5: “[e]xcept as otherwise specifically provided in this
Agreement.” (Def.’s App. 121.) According to Eastbourne, section 2.1 indicates
that JPMorgan intended to perform the obligations reflected in Washington
Mutual’s books. Eastbourne relies on the language in section 2.1 stating that
JPMorgan “agrees to pay, perform, and discharge” Washington Mutual’s liabilities,
“which are reflected on the Books and Records of [Washington Mutual] as of [Bank
Closing].”
(Def.’s App. 99.)
This language, however, does not reflect an
intention to directly benefit Eastbourne. To the extent that Eastbourne benefits
from this language, it does so as an incidental beneficiary. See In re Moose,
613 F.3d at 527 (“That a contract incidentally benefits some third party is
insufficient to establish an intent to create a third-party beneficiary.”).
10
privity with JPMorgan, which means it cannot recover from JPMorgan
on the lease.9
This result is consistent with the Court’s decision in Old
Stone Bank v. Fidelity Bank, 749 F. Supp. 147 (N.D. Tex. 1990).
In
Old Stone, the owner of a building in Fort Worth, Texas, entered
into a commercial lease with an entity called B.M.K. Resources,
Inc. (“BMK”).
Old Stone, 749 F. Supp. at 148.
BMK subsequently
assigned its interest as lessee to Fidelity National Bank of Fort
Worth (“Old Fidelity”), and the building owner assigned its right
to recover rent payments to Old Stone Bank (“Old Stone”).
Id. at
148-49. Old Fidelity eventually became insolvent, and the FDIC was
appointed as Old Fidelity’s receiver.
Id. at 149.
The FDIC then
entered into a purchase and assumption agreement with Fidelity Bank
(“New
Fidelity”),
by
which
it
transferred
a
number
of
Old
9
The Court acknowledges that this result potentially creates a “catch-22"
for plaintiffs in “failed-bank” cases like the instant one. That is, a lessor
in such a case has virtually no way of proving that the FDIC transferred the
lease to a solvent bank, like JPMorgan, because the lessor cannot use the PAA as
proof of the alleged assignment. But this catch-22 is simply a byproduct of
FIRREA. For example, had Washington Mutual remained solvent and later assigned
the lease to JPMorgan, Eastbourne could have sued both Washington Mutual and
JPMorgan on the lease were either to challenge the assignment--because one of
them would have been liable on the lease.
Here, because of FIRREA, this option is not available to Eastbourne,
because the FDIC is allowed a “reasonable time” within which it “may disaffirm
or repudiate” the lease if it “determines [the lease] to be burdensome” and
“determines [that disaffirmance or repudiation] will promote the orderly
administration of [Washington Mutual]’s affairs.” 12 U.S.C.A. § 1821(e)(1), (2)
(West 2011). And while FIRREA allows for Eastbourne to recover damages for such
a dissaffirmance or repudiation, those damages are quite limited. See id. §
1821(e)(3), (4).
But it is important to note that Congress created this
catch-22, not JPMorgan.
To say that a catch-22 exists in this case, of course, assumes that
JPMorgan did, in fact, acquire the lease. In the event that JPMorgan did not
actually acquire the lease, there would be no catch-22 here because Eastbourne
would have had no right to recover from JPMorgan anyway. In any event, the
Court, having not reached the issue, expresses no opinion as to whether JPMorgan
did or did not acquire the lease in the instant case.
11
Fidelity’s assets to New Fidelity.
After
New
Fidelity
refused
Id. at 149-50.
to
make
payments
under
the
commercial lease, Old Stone sued New Fidelity and the FDIC under
the lease, alleging that New Fidelity had assumed the lease
pursuant to the purchase and assumption agreement and that it was,
therefore, was liable to Old Stone under the lease.
Id. at 151.
The parties apparently agreed that the building was “Bank Premises”
and that New Fidelity had the option to assume or reject the lease.
Id. at 150-51.
The dispute in that case involved whether New
Fidelity had, in fact, exercised the option.
Id. at 151.
When New
Fidelity challenged Old Stone’s standing to enforce the purchase
and assumption agreement, Old Stone responded that it had standing
to enforce the PAA because the FDIC’s alleged assignment of the
lease to New Fidelity “created privity of estate between Old Stone
[Bank] and New Fidelity.”
Id.
The Court rejected this argument, observing that “[i]n order
for its theory to wash, Old Stone [had to] overcome the incredible
hurdle of showing the Court how Old Stone Bank, a non-party to the
Purchase and Assumption Agreement, derived any benefit or right
from such Agreement.”
Id. at 152.
The Court determined that “Old
Stone simply [could] not meet this burden.”
Id.
Moreover, in
addition to rejecting Old Stone’s privity-of-estate argument, the
Court held that Old Stone was not a third-party beneficiary of the
purchase and assumption agreement in light of the agreement’s
language “clearly disclaim[ing] any intention to confer rights upon
12
any
party.”10
third
Id.
The
Court,
therefore,
granted
New
Fidelity’s motion for summary judgment and dismissed Old Stone’s
claims against New Fidelity on the lease.11
IV.
Id. at 154.
Conclusion
In view of the foregoing, the Court concludes that Eastbourne
has failed to state a claim for relief against JPMorgan.
The
Court, therefore, GRANTS JPMorgan’s motion to dismiss.12 See Harold
H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 795 n.2 (5th
Cir.
2011)
(“Unlike
a
dismissal
for
lack
of
constitutional
standing, which should be granted under Rule 12(b)(1), a dismissal
for lack of prudential or statutory standing is properly granted
under Rule 12(b)(6).”); Blanchard 1986, Ltd. v. Park Plantation,
LLC, 553 F.3d 405, 409 (5th Cir. 2008) (discussing the differences
between prudential and constitutional standing).
And because
granting leave to amend would prove futile, no such leave will be
granted.
All claims in the above-styled and -numbered cause that
10
The Court also determined that, even if Old Stone had established
standing under the PAA, “New Fidelity would [have been] entitled to judgment as
a matter of law because New Fidelity never took an assignment of the [lease].”
Old Stone, 749 F. Supp. At 153.
11
A number of other Courts, with facts even more similar to the instant
case than those in Old Stone, have reached the same conclusion. See Firestone
Brookshire HE, LLC v. JPMorgan Chase Bank, N.A., No. 10-9155-VBF-FMOx (C.D. Cal.
Mar. 18, 2011) (unpublished); Interface Kanner, LLC v. JPMorgan Chase Bank, Nat’l
Ass’n, No. 10-14068-CIV-GRAHAM/LYNCH (S.D. Fla. Mar. 18, 2011) (unpublished);
GECCMC 2005-C1 Plummer St. Office Ltd. P’ship v.JPMorgan Chase Bank, Nat’l Ass’n,
No. 2:10-cv-01615-JHN-Shx (C.D. Cal. July 7, 2010) (unpublished). But see 290 at
71, L.L.C. v. JPMorgan Chase Bank, Nat’l Ass’n, No. A-09-CA-576-SS, 2009 WL
3784347 (W.D. Tex. Nov. 9, 2009).
12
In view of this ruling, the Court need not reach JPMorgan’s remaining
arguments in support of dismissal.
13
Eastbourne
has
asserted
against
JPMorgan
are
DISMISSED
WITH
PREJUDICE.
SIGNED July 27, 2011.
____________________________
TERRY R. MEANS
UNITED STATES DISTRICT JUDGE
TRM/dc
14
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