Allstate Ins. Co. v. Regions Bank

• Decision Date: 28 April 2014
• Docket Number: CIVIL ACTION 14-0067-WS-C
• Parties: ALLSTATE INSURANCE COMPANY, Plaintiff, v. REGIONS BANK, Defendant.
• Court: U.S. District Court — Southern District of Alabama

ALLSTATE INSURANCE COMPANY, Plaintiff, v. REGIONS BANK, Defendant.

CIVIL ACTION 14-0067-WS-C

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

DONE: April 28, 2014

ORDER

This matter comes before the Court on defendant's Renewed Motion to Dismiss (doc. 54). The Motion has been extensively briefed and is now ripe for disposition.

I. Background.

Plaintiff, Allstate Insurance Company, filed suit against defendant, Regions Bank, in the U.S. District Court for the Northern District of Illinois on July 18, 2013. The Complaint purported to assert three state-law claims sounding in theories of fraudulent misrepresentation, negligent misrepresentation, and fraudulent concealment / suppression.¹

According to the well-pleaded factual allegations of the Complaint,² this dispute arises from the parties' respective activities in financing a failed real estate project known as the Town of Saltaire, on the western shore of Mobile Bay. In February 2006, the project's developerformed an entity called Mobile Bay Investments, LLC ("MBI") to facilitate financing and promotion of Saltaire. (Doc. 1, ¶ 7.) Between December 2006 and December 2007, defendant, Regions Bank, loaned a total of $6.5 million to MBI. (Id., ¶ 9.)

In addition to this Regions funding, MBI caused to be established the Belle Fontaine Improvement District, a quasi-public entity that issued tax-free bonds to finance Saltaire's infrastructure. (Id., ¶ 10-12.) In December 2007, plaintiff, Allstate Insurance Company, made arrangements to purchase $12.3 million in Saltaire infrastructure bonds. (Id., ¶ 13.) As part and parcel of that endeavor, Allstate entered into a so-called "Side Agreement" with the developer, pursuant to which Allstate imposed certain binding restrictions on the release of bond proceeds. (Id.) Specifically, the Side Agreement described Regions as controlling a $14.5 million line of credit in favor of Saltaire, and prohibited the release of more than $1 million of the $12.3 million in Allstate bond proceeds until such time as Regions reached a $16 million commitment to Saltaire. (Id., ¶ 14.) In accordance with those restrictions, the bond trustee released just $1 million in bond proceeds to Saltaire after the bond closing in December 2007. (Id., ¶ 15.)

Regions was not a party to the Side Agreement; however, as of January 2008, it was aware of the $16 million Regions funding threshold imposed by Allstate as a condition precedent to the release of the other $11.3 million in bond proceeds. (Id., ¶ 14.) Also, even though Regions had never in fact funded a $14.5 million line of credit in Saltaire's favor, "Regions knew that Allstate mistakenly believed that it had." (Id., ¶ 14 n.1.) For its part, Regions was unwilling to "fully commit to the project until there had been a release of all the bond proceeds." (Id., ¶ 17.) There was thus a funding stalemate between Regions and Allstate, with neither willing to commit more funds until the other one did so. Adding an element of urgency to the situation, Regions knew that the Saltaire project was in financial peril, with contractors threatening to walk off the job because they had not been paid. (Id.) To keep the project afloat without committing more funds itself, Regions sought to cause the release of all of Allstate's bond proceeds. To that end, the Complaint alleges, Regions hatched a fraudulent scheme pursuant to which "Regions issued a bogus $2 million commitment letter in favor of MBI on January 30, 3008, the sole purpose of which was to convince Allstate and the Bond Trustee that Regions had now reached a $16 million commitment to Saltaire." (Id., ¶ 19.) That commitment letter was ultimately presented to the Bond Trustee and Allstate, prompting Allstate to authorize release of the remaining $11.3 million in bond proceeds. (Id., ¶¶ 19-20.) In keeping with its deceptiveintention from the outset, the Complaint alleges, Regions never funded the $2 million commitment specified in the letter. (Id., ¶ 20.) Allstate alleges that if it had "known that the $2 million commitment was a sham and that Regions was not even close to satisfying the $16 million commitment, Allstate would have collapsed the bond issue [and] directed the Bond Trustee to return the $11.3 million." (Id.) Instead, Regions tricked Allstate into releasing the bond proceeds, then walked away from the project, leaving Allstate holding the bag. "Saltaire failed and Allstate has lost millions of dollars." (Id., ¶ 21.)

On the strength of these well-pleaded factual allegations (which are accepted as true for purposes of Rule 12(b)(6) review), Allstate brings three fraud-related claims against Regions. Count One sounds in a theory of fraudulent representation, alleging that Regions falsely represented in the January 2008 letter that it was obligated to lend an additional $2 million to MBI, that Regions made this misrepresentation "with the intention of inducing Allstate to authorize the release of $11.3 million in bond proceeds," and that Allstate relied to its detriment on the false representation by authorizing the Bond Trustee to release the bond proceeds. (Id., ¶¶ 23-27.) Count Two alleges negligent misrepresentation, based on precisely the same facts and circumstances as Count One, with the only difference being an allegation that Regions was careless or negligent in making the false representation, rather than doing so with knowledge of its falsity. Finally, Count Three is a claim of fraudulent concealment/suppression. That cause of action alleges that "Regions concealed from Allstate that it had not funded a $14.5 million acquisition and development loan or line of credit to Saltaire in December of 2007," even though Regions knew that Allstate believed it had funded such a loan or line of credit. (Id., ¶¶ 35-36.) The Complaint alleges that "Allstate could not have discovered the truth through reasonable inquiry or inspection" (id., ¶ 40), and that the concealed information was such that Allstate would have acted differently had it known the truth.

As noted supra, Allstate initially filed the Complaint in the Northern District of Illinois. On February 14, 2014, the Illinois Court entered an Opinion and Order (doc. 40) transferring the case to this District Court. In so doing, the Illinois Court rejected Regions' request for transfer for improper venue pursuant to 28 U.S.C. § 1406.³ Nonetheless, transfer was ordered forconvenience of the parties and witnesses, in the interest of justice, pursuant to 28 U.S.C. § 1404(a).⁴ After this District Court received the transfer, Regions renewed its previously filed Motion to Dismiss, which had been denied as moot by the Illinois Court contemporaneously with the transfer. In summary, Regions argues that the Complaint must be dismissed under Rule 12(b)(6), Fed.R.Civ.P., because (i) it is inadequate to satisfy Allstate's pleading obligations under the Twombly / Iqbal line of authorities and Rule 9(b), Fed.R.Civ.P.; and (ii) it is untimely.

II. Sufficiency of Pleading under Twombly and Rule 9(b).

A. Legal Standard.

To withstand Rule 12(b)(6) scrutiny and satisfy Rule 8(a), a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face," so as to "nudge[] [its] claims across the line from conceivable to plausible." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "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, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). "This necessarily requires that a plaintiff include factual allegations for each essential element of his or her claim." GeorgiaCarry.Org, Inc. v. Georgia, 687 F.3d 1244, 1254 (11^th Cir. 2012). Thus, minimum pleading standards "require[] more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. As the Eleventh Circuit has explained, Twombly / Iqbal principles require that a complaint's allegations be "enough to raise a right to relief above the speculative level." Speaker v. U.S. Dep't of Health and Human Services Centers for Disease Control and Prevention, 623 F.3d 1371, 1380 (11^th Cir. 2010) (citations omitted). "To survive a12(b)(6) motion to dismiss, the complaint does not need detailed factual allegations, ... but must give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Randall v. Scott, 610 F.3d 701, 705 (11^th Cir. 2010) (citations and internal quotation marks omitted).

B. Misrepresentation Claims (Counts One and Two).

With respect to Counts One (fraudulent misrepresentation) and Two (negligent representation), Regions maintains that Allstate's Complaint flunks basic pleading requirements because it "complete[ly] fail[s] to allege that Regions made a false statement." (Doc. 54, at 2.) This argument overlooks clear allegations of the Complaint, to-wit: "Regions falsely represented, through its January 30, 2008 commitment letter, that it was obligated to lend an additional $2 million to MBI ...." (Doc. 1, ¶¶ 23, 29.)⁵ Thus, Counts One and Two unequivocally identifywhat Allstate claims to be a specific false representation by Regions, and have provided information as to the date of the alleged false representation, the document in which it was contained, the content of the purportedly false statement, the nefarious purpose of the alleged misrepresentation, the manner in which that false statement misled and harmed Allstate, and the ill-gotten benefit to Regions. Neither Twombly nor Rule 9(b) requires more. See, e.g., FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282, 1296 (11^th Cir. 2011) (explaining that Rule 9(b) requires a plaintiff to plead "(1) precisely what statements or omissions were made in which documents or oral...