Beal Bank Nevada v. Bus. Bank of St. Louis
| Decision Date | 08 August 2011 |
| Docket Number | No. 4:11 CV 561 DDN,4:11 CV 561 DDN |
| Parties | BEAL BANK NEVADA, Plaintiff, v. THE BUSINESS BANK OF ST. LOUIS, Defendant. |
| Court | U.S. District Court — Eastern District of Missouri |
This action is before the court on the motion of plaintiff Beal Bank Nevada to dismiss the counterclaims of defendant The Business Bank of St. Louis. (Doc. 14.) The parties have consented to the exercise of plenary authority by the undersigned United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). (Doc. 13.) Oral arguments were heard on July 27, 2011. For the reasons set out below, the court grants the motion to dismiss.
On March 25, 2011, plaintiff Beal Bank Nevada (Beal Bank) commenced this action seeking declaratory, monetary, and related relief against defendant The Business Bank of St. Louis (BBSL), for BBSL's failure to remit payments owed to Beal Bank. (Doc. 1.)
Prior to September 6, 2007, BSSL made a loan to Matthew J. and Toni Ratteree in the principal amount of $4.9 million (the "Ratteree Loan"). (Doc. 1 at ¶ 7; Doc. 11 at ¶ 7.) On September 6, 2007, BBSL sold an undivided 82% interest in the Ratteree Loan to Champion Bank. (Doc. 1-1; Doc. 11-1.) The terms of the sale were governed by a Participation Agreement (the "Participation"). (Id.) Under the Participation, all payments due to Champion were to be remitted by BBSL within ten business days from their receipt. (Participation, Doc. 1-1 at ¶ 2.) The Participation also contained the following right-of-first-refusal provision:
11. Assignability; Right to Repurchase. Without the prior written consent of Originating Bank, Participating Bank may not assign its obligation to fund disbursements orexpenditures in connection with the Loan or sell, pledge or otherwise transfer its Participation in the Loan without first offering to Originating Bank the right to repurchase the Participation. Originating Bank shall have no obligation to repurchase the Participation under any circumstances. Participating Bank shall provide to Originating Bank a written agreement from a third party to purchase the Participation, and Originating Bank shall have fifteen (15) days from the receipt of such agreement to notify Participating Bank that Originating Bank will repurchase the Participation on the same terms as set out in such agreement. Participating Bank shall have the right, if Originating Bank does not notify Participating Bank that it is exercising its right to repurchase the Participation within such fifteen (15) day period, to assign or transfer the Participation to such third party.
(Participation, Doc. 1-1 at ¶ 11.)
On April 30, 2010, Champion was closed by the Missouri Division of Finance as a "failed bank." (Doc. 1-2.) The Federal Deposit Insurance Corporation (FDIC) was named receiver pursuant to 12 U.S.C. § 1821. (Id.) The FDIC then began liquidating certain of Champion's assets, including the Participation. (Doc. 1 at ¶ 11; Doc. 11 at ¶¶ 12,13.) On May 20, 2010, BBSL offered to repurchase the Participation from the FDIC for approximately 50% of its then-outstanding balance. (Doc. 1-3) On September 22, 2010, the FDIC rejected BBSL's offer and encouraged BBSL to "make an additional offer that more closely resembles the value of the Participation interest."1 (Id.) The FDIC undertook to sell the Participation through a bidding process, and made BBSL aware of its intention to do so. (Doc. 1 at ¶ 13; Doc. 11 at ¶ 13.) BBSL objected to the sale of the Participation to the FDIC on at least three occasions: (1) by letter dated September 27, 2010; (2) by letter dated October 15, 2010; and (3) in a phone conversation on October 12, 2010. (Doc. 1-6; Doc. 11 at ¶ 20.)
On December 3, 2010, the FDIC and Beal Bank executed an Assignment and Assumption of Interests and Obligations (the "Assignment"), under which the FDIC transferred all of the rights, title, and interests in the Participation to Beal Bank, with Beal Bank assuming "all obligationsarising from and after the date [t]hereof." (Doc 1-4; Doc. 1-2 at ¶¶ 1,2.) On January 11, 2011, the FDIC sent a letter to BBSL advising it of the sale of the Participation to Beal Bank. (Doc. 1-5; Doc. 11 at 1 16.)
Since then, BBSL has not remitted to Beal Bank any of the payments due under the Participation. (Doc. 1 at ¶ 18; Doc. 11 at ¶ 18.) On January 17, 2011, BBSL wrote a letter to CLMG, Beal Bank's authorized servicer, stating its challenges to the purported Assignment. (Doc. 17.) BBSL argued that FDIC repudiation requires payment of damages, and also claimed tortuous interference with state contractual rights for the breach of its right-of-first-refusal. (Id.) In a letter to CLMG dated February 7, 2011, BBSL reasserted these allegations against CLMG and Beal Bank. (Doc. 1-7; Doc 11 at ¶ 21.) BBSL also raised these complaints with the FDIC directly. (Doc. 1-6; Doc. 11 at ¶ 20.) In response, the FDIC advised BBSL on at least two occasions of BBSL's right to file an administrative claim against it, as receiver, for any damages BBSL believed the FDIC had caused. (Id.) BBSL has not filed any such administrative claim. (Doc. 1 at ¶ 22; Doc. 11 at ¶ 22.)
On March 25, 2011, Beal Bank commenced this action by filing a judicial complaint seeking relief. (Doc. 1.) In Count I, Beal Bank seeks a declaratory judgment that the FDIC had the power to sell the Participation to Beal Bank and that the sale was valid.
In Count II, Beal Bank seeks a declaratory judgment that (a) any claims BBSL may have arise from the FDIC's sale of the Participation to Beal Bank and relate to the independent, intervening acts or omissions of the FDIC; (b) any such claim is cognizable, if at all, solely against the FDIC; (c) BBSL is required to pursue any such claims through the exclusive claims process provided for by the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), 12 U.S.C. §1821; (d) BBSL has failed to invoke, pursue, and exhaust these processes; (e) absent BBSL's compliance with such processes, BBSL's claim is jurisdictionally barred under 12 U.S.C. § 1821(d)(13)(D); and (f) any such claim cannot be used as a basis to deny payments to Beal Bank under the Participation.
In Count III, Beal Bank seeks a declaratory judgment that BBSL has no claim against Beal Bank related to any alleged violation of the Participation occurring prior to the sale date. In Count IV, Beal Bank seeks an order (a) directing BBSL to perform under the Participation and make payments when due to Beal Bank; and (b) directing BBSL to account to Beal Bank for all amounts due under the Participation. Finally, in Count V, Beal Bank seeks an award of attorneys' fees.
On May 20, 2011, defendant BBSL filed an Answer, Affirmative Defenses, and Counterclaim. (Doc. 11.) In its answer and affirmative defenses, BBSL denies that Beal Bank is entitled to any of the relief sought, claims that Beal Bank is not a valid party to the Participation, and asserts that it has performed all of its obligations under the Participation and has at all times acted in good faith. (Id.)
BBSL alleges that in September 2010, it raised its objections to the FDIC, reiterating that under the terms of the Participation, the FDIC could not transfer the Participation without first offering BBSL the right to repurchase it, pursuant to BBSL's right-of-first-refusal under paragraph 11 of the Participation. (Id. at ¶ 11.) BBSL further alleges that Beal Bank knew or should have known of the existence of its right-of-first-refusal and that both Beal Bank and the FDIC failed to comply with the right-of-first-refusal in executing the transfer. (Id. at ¶¶ 12, 15.)
In Count I of its counterclaims, BBSL alleges that Beal Bank is in breach of contract for the FDIC's failure to comply with the right-of-first-refusal, and that Beal Bank assumed liability for this breach from the FDIC under the terms of the Assignment. (Doc. 11 at ¶¶ 17-19.) BBSL seeks monetary damages in excess of $75,000.00 for damages caused by this breach, as well as incidental damages, prejudgment interest, attorneys' fees, and litigation costs. (Doc. 11 at ¶¶ 10, 11.)
In Count II of its counterclaims, BBSL seeks (a) an order from this court directing Beal Bank to disclose the price paid for the Assignment of the Participation; (b) rescission of the Assignment and an order that it be given the option to repurchase the Participation interest; and (c) that it be awarded its costs, expenses, and attorneys' fees. (Id.)
On June 10, 2011, plaintiff Beal Bank moved to dismiss defendant BBSL's counterclaims. (Docs. 14, 15.) First, Beal Bank argues that dismissal of BBSL's counterclaims is proper under Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction, because BBSL failed to exhaust its administrative remedies under FIRREA. (Doc. 15 at ¶¶ 3-7.) Second, Beal Bank argues that dismissal of BBSL's counterclaims is proper under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted, because FIRREA preempts BBSL's contractual right-of-first-refusal and because, under Missouri law, Beal Bank could not have breached a contract to which it was not a party at the time of breach. (Doc. 15 at ¶¶ 7-12.) Finally, Beal Bank argues that dismissal of BBSL's counterclaims is required by Fed. R. Civ. P. 12(b)(7) for failure to join a necessary party because the FDIC is an absent necessary party to the counterclaim. (Doc. 15 at ¶¶ 13-15.)
The court dismisses BBSL's counterclaims for lack of subject matter jurisdiction and for lack of a necessary party. The court does not reach the second issue of whether the counterclaims state a claim upon which relief can be granted.
Beal Bank argues that dismissal of defendant BBSL's counterclaims is required for lack of subject matter jurisdiction, because BBSL failed to exhaust its administrative remedies under FIRREA. 12 U.S.C. § 1821(d). Beal Bank also argues that the relief sought by...
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