Agem Mgmt. Servs., LLC v. First Tenn. Bank Nat'l Ass'n

• Decision Date: 25 April 2013
• Docket Number: Civil Action No. 12–1370.
• Citation: 942 F.Supp.2d 611
• Parties: AGEM MANAGEMENT SERVICES, LLC, et al. v. FIRST TENNESSEE BANK NATIONAL ASSOCIATION.
• Court: U.S. District Court — Eastern District of Louisiana

942 F.Supp.2d 611

AGEM MANAGEMENT SERVICES, LLC, et al.

v.FIRST TENNESSEE BANK NATIONAL ASSOCIATION.

Civil Action No. 12–1370.

United States District Court, E.D. Louisiana.

April 25, 2013.

Joseph M. Bruno, Daniel A. Meyer, Bruno & Bruno, New Orleans, LA, Christopher Michael Hatcher, Blue Williams, LLP, Metairie, LA, for AGEM Management Services, LLC, et al.

Kent A. Lambert, Alexander McVoy McIntyre, Jr., Katie L. Dysart, Baker Donelson Bearman Caldwell & Berkowitz, New Orleans, LA, Katherine Murphy Bogard, Mark D. Griffin, Baker Donelson Bearman Caldwell & Berkowitz, Memphis, TN, for First Tennessee Bank National Association.

ORDER AND REASONS

JANE TRICHE MILAZZO, District Judge.

Before the Court is Defendant's Motion to Dismiss for Failure to State a Claim (R. Doc. 31) and Defendant's Motion to Strike Exhibit A to Plaintiffs' Response Memorandum in Opposition (R. Doc. 36). For the following reasons, the Motion to Strike is DENIED and the Motion to Dismiss is GRANTED.

BACKGROUND

I. Factual Background

AGEM Management Services, LLC (“AGEM”), Bruno Wink, LLC (“Bruno Wink”), and Tangi East, LLC (“Tangi East”) (collectively “Plaintiffs”) are corporate entities that were formed for the purpose of developing commercial real estate on the Gulf Coast. (R. Doc. 30 at ¶ 7.) In order to finance their ventures, Plaintiffs issued bonds to investors in the form of variable rate demand notes (“VRDNs”), which are bonds that have a long-term nominal maturity with a “floating” interest rate that fluctuates periodically in accordance with the SIFMA Swap Index rate. ( See R. Doc. 30 at ¶ 8; see also R. Doc. 31–1 at 4.) Plaintiffs were responsible for making the applicable variable rate interest payments to investors who purchased the VRDNs. The primary security for the obligations of repayment under the VRDNs was an irrevocable Letter of Credit to be issued by Whitney National Bank (“Whitney Bank”). (R. Doc. 30 at ¶ 8.) Additionally, Plaintiffs employed FrazierLanier Company (“Frazier”), an investment-banking firm, to serve as their “remarketing agent.” ( Id. at ¶ 9.) Frazier was responsible for locating investors to purchase Plaintiffs' VRDNs, and also for setting, on a weekly or monthly basis, the interest rates payable on the VRDNs. ( Id.) On April 1, 2008, Bruno Wink and AGEM obtained $7.8 million and $1.9 million in financing, respectively, under the above VRDN arrangement. (R. Doc. 30 at ¶ 10.) On June 2, 2008, Tangi East obtained $5.5 million in financing. ( Id.)

After issuing the VRDN bonds, and upon the advice of Whitney Bank, Plaintiffs entered into Interest Rate Swap Agreements (“Swap Agreements”) on August 12, 2008 with Defendant First Tennessee Bank National Association (“First Tennessee”) in an effort to hedge against the variable interest rate risk associated with the VRDNs. (R. Doc. 30 at ¶ 15.) Plaintiffs contracted with First Tennessee to pay a fixed interest rate on a notional amount of debt in return for First Tennessee's payment of a variable interest rate on the same notional amount of debt. ( Id.) By doing so, Plaintiffs hoped to lock in a fixed interest rate on their outstanding VRDN debt, and thereby protect themselves in the event of an increasing SIFMA rate (R. Doc. 30 at ¶ 13.) The Swap Agreements were to remain effective through March 26, 2013 for Bruno Wink and AGEM, and April 17, 2013 for Tangi East. ( Id.)

II. Plaintiffs' Allegations

Plaintiffs seek relief against First Tennessee for breach of contract, fraudulent suppression, breach of fiduciary duty, misrepresentation, and civil conspiracy. (Doc. 30 at ¶ 16, 18–39.)

Specifically, Plaintiffs allege that Whitney and First Tennessee operated under a fee sharing arrangement in which First Tennessee would pay Whitney a one-time fee in exchange for interest rate swap referrals. (R. Doc. 30 at ¶ 12.) Plaintiffs aver that under this contractual agreement, Whitney Bank would provide First Tennessee with counterparties (such as Plaintiffs) who speculate that bond interest rates will increase. First Tennessee, who speculates that bond interest rates will decrease, would then enter into swap agreements with said counterparties. ( Id.) Plaintiffs contend that Whitney benefits by receiving a portion of the one-time, industry-standard fee generated from the swap product transaction. Plaintiffs claim that First Tennessee and Whitney operated under this arrangement for over five years preceding Plaintiffs' Swap Agreements. ( Id.)

Plaintiffs maintain that Whitney Bank, acting as First Tennessee's agent pursuant to the above agreement, knowingly made false representations to Plaintiffs in order to induce them to enter into Swap Agreements with First Tennessee. Plaintiffs aver that this agreement resulted in substantial profits to both First Tennessee and Whitney Bank at the expense of Plaintiffs. (R. Doc. 30 at ¶ 14.) Plaintiffs also claim that First Tennessee did not disclose pertinent information to Plaintiffs at the time of the Swap Agreements. Had they done so, Plaintiffs argue, Plaintiffs would not have entered into the Swaps. (R. Doc. 30 at ¶ 17.)

Succinctly, Plaintiffs base their injury on two primary misrepresentations: first, that Whitney's representation that the interest rate swaps would have the effect of converting the variable rates that Plaintiffs owed on their VRDN bonds into fixed interest rates, thereby eliminating the interest rate risk associated with their VRDNs. (R. Doc. 30 at ¶ 14.) Second, that First Tennessee's failure to disclose that an impairment on Whitney's Letter of Credit underlying each of the VRDN issuanceswould likely increase the interest rates Plaintiffs had to pay on the VRDN bonds, thus resulting in higher borrowing costs to Plaintiffs. (R. Doc. 30 at ¶ 17.) Plaintiffs assert that absent these intentional misrepresentations they would not have entered into the Swap Agreements with First Tennessee, and should accordingly be afforded relief. (R. Doc. 30 at ¶ 16.)

III. Procedural History

Plaintiffs filed the instant matter on April 19, 2012 in Civil District Court for the Parish of Orleans. (R. Doc. 30.) Defendant removed the case to this Court on May 29, 2012. (R. Doc. 1.) Defendant subsequently filed a Motion to Dismiss on June 5, 2012. (R. Doc. 11.) On November 7, 2012, the Court granted the Motion and dismissed Plaintiff's claims without prejudice. (R. Doc. 25.) Plaintiffs filed their Amended Complaint on November 28, 2012. (R. Doc. 30.)

On December 12, 2012 Defendant filed a Motion to Dismiss the Amended Complaint. (R. Doc. 31.) On January 8, 2013 Plaintiffs filed an Opposition. (R. Doc. 35.) On January 15, 2013 Defendant filed a Motion to Strike Exhibit A from the Opposition. (R. Doc. 36.) On January 16, 2013 a Reply was filed by Defendant. (R. Doc. 41.) On January 22, 2013 the Plaintiffs filed an Opposition to Defendant's Motion to Strike. (R. Doc. 42.) The Court heard oral argument on both Motions on January 30, 2013 and took the Motions under submission. (R. Doc. 44.)

LEGAL STANDARD

To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead enough facts “to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A claim is “plausible on its face” when the pleaded facts allow the court to “[d]raw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. A court must accept the complaint's factual allegations as true and must “draw all reasonable inferences in the plaintiff's favor.” Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir.2009). The Court need not, however, accept as true legal conclusions couched as factual allegations. Iqbal, 129 S.Ct. at 1949–50.

To be legally sufficient, a complaint must establish more than a “sheer possibility” that the plaintiff's claims are true. Id. “A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action” will not suffice. Iqbal, 129 S.Ct. at 1949 (quotations and citation omitted). Rather, the complaint must contain enough factual allegations to raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiffs' claim. Lormand, 565 F.3d at 255–57. The Court's review “is limited to the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir.2010) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498–99 (5th Cir.2000)). Ultimately, If it is apparent from the face of the complaint that an insurmountable bar to relief exists, and the plaintiff is not entitled to relief, the court must dismiss the claim. Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007).

LAW AND DISCUSSION

I. Motion to Strike

“When considering a Rule 12(b)(6) motion, a court may consider documentsoutside the complaint when they are: (1) attached to the motion; (2) referenced in the complaint; and (3) central to the plaintiff's claims.” Maloney Gaming Management, L.L.C. v. St. Tammany Parish, 456 Fed.Appx. 336, 340–341 (5th Cir.2011); see also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (directing courts to “consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6)motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice”). Defendant asserts that the letters attached to Plaintiffs' Opposition are not incorporated by reference or are otherwise central to their allegations in the Amended Complaint. (R. Doc. 36–1 at 2–3.) As such, Defendant requests the Court...