CasKim, LLC v. Carver Bible Coll.
| Decision Date | 08 February 2023 |
| Docket Number | 1:22-cv-1864-MLB |
| Parties | CasKim, LLC and Pacman Properties, LLC, Plaintiffs, v. Carver Bible College, Inc., Defendant. |
| Court | U.S. District Court — Northern District of Georgia |
Before the Court are Plaintiffs' Motion to Dismiss Defendant's Counterclaims (Dkt. 13), Defendant's Motion to Deny the Plaintiffs' Motion to Dismiss (Dkt 19)[1] Defendant's Motion to Disqualify Law Firm of Schreeder Wheeler and Flint LLP (Dkt. 24), and Defendant's Motion for Leave to Amend Answer, Defenses and Counterclaims (Dkt. 26). The Court grants in part Defendant's Motion for Leave to Amend Answer, denies as moot Plaintiffs' Motion to Dismiss Counterclaims, denies as moot Defendant's Motion to Deny Plaintiffs' Motion to Dismiss, and denies Defendant's Motion to Disqualify Law Firm of Schreeder, Wheeler and Flint LLP.
This case involves a series of transactions between Plaintiffs Pacman, LLC and CasKim, LLC (“Plaintiffs”)[2] and Defendant Carver Bible College, Inc. (“Defendant”). It also involves the acts of Plaintiffs' law firm Schreeder, Wheeler & Flint LLP (“SWF”), Leo Rose, a partner at SWF, and Oronda M. Smith, Defendant's former counsel and a member of Defendant's Board of Trustees. The claims, counterclaims and motions in this case arise from different-but in some cases related- transactions. The Court summarizes the relevant transactions below.
In November 2017, Defendant Carver borrowed $100,000 from Pacman and, as part of that transaction, granted Pacman a 30-year right of first refusal (“ROFR”) on a property Defendant owned. (Dkt. 27 ¶ 5, 7.)[3] It essentially states that, if Defendant receives a legitimate third-party offer for the purchase of the property and wishes to accept that offer, Pacman may purchase the property on the same terms as the third-party offer. (Dkt. 26-2 at 1, 26-4 at 1-2.) Defendant alleges its former president, Robert Crummie, granted the ROFR without its Board of Director's authority, consent, knowledge, or approval. (Dkt. 27 ¶ 4-5.)
Defendant and Pacman amended the ROFR twice, most recently in July 2019. (Dkt. 27 ¶¶ 10-12.) The third agreement extended Pacman's rights until July 2080. It also states that the ROFR remains in effect even if Pacman exercises its option after a legitimate third-party offer but then fails to close on its purchase of the properly. (Dkt. 27 ¶¶ 10-12.) Pacman filed each ROFR with the Fulton County Superior Court. (Dkt. 27 ¶¶ 9, 10.)
In 2019, Pacman loaned Defendant $300,000. (Dkts. 1 at ¶¶ 10-11, 27 ¶¶ 42-43.) Pacman made the loan pursuant to a promissory note with a maturity date of July 31, 2020 and a monthly interest rate of 3.5%. (Dkt. 1 ¶ 10.) A security deed designated the property as collateral for the loan. (Dkt. 1 ¶ 10.) When the note was due, Defendant owed Pacman $405,000 in principal and accumulated interest. (Dkt. 1 ¶ 12, at 41.) Defendant requested an extension and additional funds. Pacman agreed, and the parties executed a new note. (Dkt. 1 ¶ 12.) The 2020 note had a total principal of $605,000, which included the original loan balance of $300,000, accrued interest of $105,000 on the original loan, and an additional advance of $200,000. (Dkt. 1 at 41.) The 2020 note was secured by an amendment to the 2019 security deed and had a maturity date of July 31, 2021. (Dkt. 1 ¶ 12.)
The loan agreements called for a portion of the loan proceeds to be held in escrow by SWF. (Dkt. 27 ¶ 45.) SWF was to disburse the escrowed funds to some of Defendant's creditors, including for payment on an outstanding water bill, repairs to the property, and liens owed to the Georgia Department of Labor. (Dkts. 26-6 at 5, 26-7, 26-8.) Defendant claims Pacman (through SWF) failed to disburse approximately $96,000 in escrowed funds. (Dkt. 27 ¶ 45.)
Leo Rose, a partner at SWF, represented Pacman in the negotiation and execution of the 2019 and 2020 loan documents. (Dkt. 24 at 2.) Oronda Smith (Defendant's former counsel and a member of Defendant's Board of Trustees) represented Defendant. (Dkt. 24-1.) Smith also gave Pacman a legal opinion that the 2020 documents are enforceable. (Id.) Defendant alleges that was not a legitimate legal opinion because Smith merely added her letterhead and signature to a document SWF drafted. (Dkt. 24 at 3-4.) Defendant further alleges the individuals who executed the loan agreements on Defendant's behalf were not authorized to do so. (Dkt. 24 at 2.)
Simultaneous to the 2020 note, Defendant entered an “Agreement for the Sale and Leaseback” with Pacman and CasKim LLC, an entity affiliated with Pacman. (Dkt. 1 ¶ 14.) The sales agreement stated that, if Defendant failed to repay the 2020 note by its maturity date, Defendant would (i) sell the property to CasKim for $650,000, (ii) CasKim would assume the indebtedness of Pacman, and (iii) CasKim would lease the property back to Defendant. (Dkt. 1 ¶ 14.) Pursuant to the sale agreement, Defendant delivered certain documents (including a warranty deed transferring the property to CasKim) to an escrow agent. (Dkt. 1 ¶ 16.) Defendant contends Clifford Ice (Defendant's Interim President) executed the sale agreement without authority and that the warranty deed was altered after its execution.[4] (Dkt. 24 at 2.)[5]
Defendant defaulted on the 2020 note but refused to sell the property to CasKim. (Dkt. 1 ¶¶ 18-19.) Pacman thus advertised the property for sale at foreclosure. (Id.) Defendant then asked Pacman to stop the foreclosure so it could complete the sale to CasKim. (Dkt. 1 ¶ 20.) Pacman did so, and the parties executed a settlement agreement in August 2021. (Id.) Smith represented Defendant; Rose represented Plaintiffs. (Dkt. 24 at 2, 4.)
The settlement agreement (i) ratified and confirmed the sale agreement, (ii) instructed the escrow agent to record the warranty deed and release the sale documents to CasKim, (iii) affirmed the validity of the loan agreements and the ROFRs, and (iv) released CasKim, Pacman and SWF from any claims arising from these transactions. (Dkt. 1 ¶ 23.) Smith recommended Defendant sign the settlement agreement. (Dkt. 24 at 5.) Defendant did. (Id.) The parties then started arguing about Defendant's alleged failure to insure the property. So Defendant decided not to sell CasKim the property. (Dkt. 1 ¶¶ 24-30.) Plaintiffs say Defendant breached both the sale agreement and the settlement agreement.
Plaintiffs sued Defendant for specific performance, breach of contract, and attorney's fees arising from Defendant's refusal to sell Plaintiffs the property. (Dkt. 1.) Defendant counterclaimed for slander of title and fraud based on the ROFRs. (Dkt. 10.) Plaintiffs moved to dismiss Defendant's counterclaims for failure to state a claim. (Dkt. 13.) Defendant moved for leave to amend its counterclaim, proposing six additional causes of action for breach of contract, unjust enrichment, promissory estoppel, conversion, usury, and attorney's fees based on the ROFRs and loan agreements. (Dkts. 26, 27.) Plaintiffs oppose Defendant's motion for leave to amend, arguing all counterclaims (except the claims for breach of contract and usury) are futile.[6] (Dkt. 32.) Defendant then moved to disqualify SWF as a result of the law firm's involvement in the underlying transactions. (Dkt. 24.)
Rule 15 provides a one-time automatic right to amend a pleading within 21 days after serving it, or, if the pleading is one to which a responsive pleading is required, within 21 days after service of a responsive pleading or a motion under Rule 12(b), (e), or (f), whichever is earlier. Fed.R.Civ.P. 15(a)(1). Thereafter, Rule 15 requires a plaintiff seeking to amend her complaint to obtain either the consent of the defendant or leave of court. Fed.R.Civ.P. 15(a)(2). Such leave should be freely given when justice so requires. Id. “Unless there is a substantial reason to deny leave to amend, the discretion of the district court is not broad enough to permit denial.” Burger King Corp. v. Weaver, 169 F.3d 1310, 1319 (11th Cir. 1999). Substantial reasons include “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party . . ., [and] futility of amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962).
“A motion to dismiss a counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6) is evaluated in the same manner as a motion to dismiss a complaint.” Geter v. Galardi S. Enterprises, Inc., 43 F.Supp.3d 1322, 1325 (S.D. Fla. 2014). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “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.” Id. This requires more than a “mere possibility of misconduct.” Id. at 679. Plaintiff's well-pleaded allegations must “nudge[] [his] claims across the line from conceivable to plausible.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
A party is entitled to counsel of his choice, and that choice “may be overridden only if compelling reasons exist.” Herrmann v. GutterGuard, Inc., 199 Fed.Appx. 745, 752 (11th Cir. 2006). Because disqualification of counsel is a “harsh sanction” that often results in “substantial hardship to the...
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