Branch Banking & Tr. Co. v. ServisFirst Bank
| Decision Date | 20 December 2019 |
| Docket Number | Civil Action No. 2:19-cv-00366 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | BRANCH BANKING AND TRUST COMPANY, a North Carolina corporation, Plaintiff, v. SERVISFIRST BANK; MBH HIGHLAND, LLC d/b/a HIGHLAND HOSPITAL; WORLD GLOBAL CAPITAL, LLC d/b/a FUNDKITE FUNDING; GREEN CAPITAL FUNDING, LLC; and MCA RECOVERY LLC, Defendants. |
Pending are (1) a motion to dismiss or alternatively transfer venue of the interpleader complaint, filed May 30, 2019 by defendants World Global Capital, LLC, Green Capital Funding, LLC, and MCA Recovery, LLC (collectively the "New York Defendants"), (2) a motion for remand, filed June 7, 2019 by defendant MBH Highland, LLC ("Highland"), a hospital, (3) a motion to realign the parties, filed June 20, 2019 by the New York Defendants, (4) a motion for leave to interplead and deposit interpleader funds with the court, filed July 12, 2019 by plaintiff Branch Banking and Trust Company ("BB&T"), and (5) a motion requesting leave to file an amended complaint, filed July 26, 2019 by BB&T.
On December 11, 2019, the court granted the parties' joint motion to stay all deadlines and trial and pretrial dates in this case. This followed the court's memorandum opinion and order, entered November 1, 2019, granting the New York Defendants' motion to stay discovery pending a ruling on certain preliminary jurisdictional motions. As discussed therein, BB&T instituted this interpleader action in the Circuit Court of Kanawha County, West Virginia on April 5, 2019. Compl., ECF No. 1-1 ("ECF No. 1-1"). The underlying dispute revolves around competing claims to certain deposit accounts opened and maintained by defendant Highland at BB&T, with which Highland maintains its account at the BB&T branch located at 300 Summers Street, Charleston, West Virginia. Id. ¶¶ 9, 15-17.
The interpleader complaint alleges that in February 2019, defendants World Global Capital, LLC ("WGC") and Green Capital Funding, LLC, ("GCF") were each awarded a judgment in the Supreme Court of the State of New York against Wesley E. Mason III, Meridian Behavioral Health Systems, LLC ("Meridian")1 and itsaffiliates, including Highland. ECF No. 1-1 ¶¶ 10-11.2 On February 27, 2019 and March 1, 2019, BB&T allegedly received two Information Subpoenas with Restraining Notices in connection with the two New York judgments stating that $305,466.91 (WGC) and $834,001.00 (GCF), respectively, remained due on the judgments plus interest, and instructing BB&T to freeze Highland's BB&T deposit accounts. Id. ¶¶ 12-13; Highland's Cross-cl. ¶ 41, ECF No. 3. On March 1, 2019, BB&T also received a levy and demand on Highland's deposit accounts, directing BB&T to remit the sum of $876,113.65 to GCF. ECF No. 1-1 ¶ 14. The interpleader complaint further alleges that "BB&T has been notified," by sources unidentified, that the funds requested may not properly belong to WGC or GCF and that ServisFirst Bank ("ServisFirst") "may hold a first priority perfected security interest in all assets of [Meridian] and its affiliates, including Highland, and has filed UCC financing statements regarding the same." Id. ¶ 15. BB&T instituted this interpleader complaint as a disinterested stakeholder with no claim to the money in Highland's deposit accounts. Id. ¶ 22. BB&T seeks a court's determination of the proper distribution of the funds in these accounts among the conflicting claims of the defendants. Id. ¶¶ 15, 20.
The New York Defendants' entitlement to the funds relates to two contracts signed by Mr. Mason as "Seller," each titled "Future Receivables Sale and Purchase Agreement." See Castro Decl., Exs. 2, 4, ECF No. 9-1. On November 29, 2018, Mr. Mason — purportedly acting on behalf of Meridian, Highland, and other affiliates — signed an agreement whereby GCF agreed to pay $750,000.00 in exchange for Seller's right, title and interest in 25% of future receipts from receivables, i.e., money generated from goods and services sold, of Meridian, Highland, and other affiliates. Id., Ex. 2. The 25% yield from the receivables was to be remitted in daily installments of $9,599.00 until there has been paid the sum of $1,124,250.00 which is designated as the "Purchased Amount." Id. Mr. Mason signed an "Affidavit of Confession of Judgment" on November 30, 2018 that authorized the entry of judgment against Mr. Mason, Meridian, Highland, and other affiliates without notice in the event of default. Id., Exs. 4-5; Highland's Cross-cl. ¶ 23, ECF No. 3.
On January 22, 2019, WGC reached a similar agreement with Mr. Mason, this time signing on behalf of Highland and other affiliated entities, but not Meridian itself. See Castro Decl., Ex. 2, ECF No. 9-1. Doing business as Fundkite Funding, WGC agreed to pay $200,000.00 in exchange for Highland and other affiliated entities agreeing to sell 25% of each of their future receipts from receivables and remitting daily installments of$2,591.00 for a total purchased amount of $298,000.00. Id. That same date, Mr. Mason signed another Affidavit of Confession of Judgment that WGC could enter in the event of default. Id., Ex. 2-3; Highland's Cross-cl. ¶ 27, ECF No. 3.
Highland filed its answer and crossclaims against the New York Defendants in the state court action on April 16, 2019, alleging that it was not a party to either of these agreements. See Highland's Answer & Cross-cl. ¶¶ 22, 26, ECF No. 3. Still, GCF and WGC obtained Highland's BB&T deposit account information and began debiting payments from its accounts. Id. Between November 29, 2018 and February 20, 2019, GCF allegedly debited $337,964.00 from Highland's BB&T deposit accounts. Id. ¶ 29. Between January 22, 2019 and February 20, 2019, WGC allegedly debited $51,820.00 from these accounts. Id. ¶ 30.
On February 13, 2019, the New York Defendants allegedly each received a letter from ServisFirst informing GCF and WGC that ServisFirst has a perfected security interest in Highland's assets that has priority over WGC's and GCF's interests, and the New York Defendants must stop any collection efforts or else ServisFirst will consider these actions to be conversion. Highland's Cross-cl. ¶ 32, ECF No. 3. ServisFirst, which filed its own answer and crossclaims, alleges that as a condition of providing millions of dollars in financing for the operations of Meridian and itsaffiliates, including Highland, it obtained a security interest in certain assets, including Highland's accounts. ServisFirst Cross-cl. ¶ 1, ECF No. 18. After Meridian and its affiliates defaulted on the loans, ServisFirst agreed to refrain from taking further action if Meridian, MBH West Virginia, LLC (Highland's parent entity),3 and Highland agreed to conform to a budget approved by ServisFirst and refrain from transferring funds or assets subject to ServisFirst's security interest to any third parties without ServisFirst's consent. Id. ¶¶ 10-11.
Despite receiving express warnings that their authority to access Highland's deposit accounts was "revoked," GCF and WGC collectively debited an additional $48,760.00 between February 11 and February 14. Highland's Cross-cl. ¶¶ 33-34, ECF No. 3. After Highland and its related parties notified BB&T directly that GCF and WGC's account access was revoked, BB&T stopped GCF and WGC from debiting Highland's accounts after February 14, 2019. Id. ¶ 35. GCF and WGC then proceeded to obtain the New York judgments. On February 20, 2019, GCF obtained its judgment by confession, decreeing that Meridian, Mr. Mason, and other affiliates, including Highland, owed GCF $843,600.00 after defaulting on the November 29, 2018 transaction. Castro Decl., Ex. 5, ECF No. 9-1. On February 21, 2019, WGC obtained a separatejudgment by confession, ruling that Highland, Mr. Mason, and other affiliates owed WGC $308.057.91 after defaulting on the January 22, 2019 agreement. Id., Ex. 3. BB&T was subsequently served with the two Information Subpoenas with Restraining Notices instructing it to freeze Highland's BB&T deposit accounts. Highland's Cross-cl. ¶¶ 41-44, ECF No. 3.
In sum, Highland alleges in its crossclaims that it possesses a valid claim to the deposit funds, subject to ServisFirst's perfected security interest (Count I), the New York Defendants violated the Uniform Enforcement of Foreign Judgments Act ("UEFJA"), W. Va. Code § 55-14-2, by failing to domesticate the New York judgments in West Virginia (Count II), the New York Defendants violated the Business Registration Tax Act (Count III), MCA Recovery, LLC violated the Collection Agency Act of 1973 (Count IV), WGC violated the Trade Names Act, W. Va. Code § 47-8-4 (Count V), WGC and GCF committed usury by concealing that the purported factoring transactions were in fact loan agreements charging in excess of 18 percent interest (Count VI), unjust enrichment/disgorgement by WGC and GCF (Count VII), and tortious interference with business relations by the New York Defendants (Count VIII). See Highland's Cross-cl., ECF No. 3. ServisFirst asserts nearly identical crossclaims against the New York Defendants, except it brings a claim of conversion instead of usury under Count VI and brings an additional claim of fraudagainst the New York Defendants. See ServisFirst's Cross-cl., ECF No. 18.4
After receiving service of process on April 12, 2019, the New York Defendants filed a notice of removal on May 8, 2019, pursuant to 28 U.S.C. §§ 1332, 1335, 1441, and 1446 et seq. See Not. Removal, ECF No. 1 ("ECF No. 1"). The notice mirrors the case caption from the state interpleader action, which positions BB&T as the nominal plaintiff and the New York Defendants, ServisFirst, and Highland as defendants. The notice also alleges that diversity jurisdiction exists in this case because BB&T is a citizen of North Carolina, ServisFirst is a citizen of Alabama, the New York Defendants are citizens of New York, and Highland is a citizen of Tennessee. ECF No. 1 ¶ 5; Compl. ¶¶ 1-6; 28 U.S.C. § 1332.
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