Fifth Third Bank v. Double Tree Lake Estates, LLC
| Decision Date | 12 February 2013 |
| Docket Number | CAUSE NO.: 2:11-CV-233-PPS-PRC |
| Parties | FIFTH THIRD BANK, Plaintiff, v. DOUBLE TREE LAKE ESTATES, LLC, DOUBLETREE GOLF, LLC, DBL RESIDENTIAL, L.P., KENNETH MATNEY, ANTHONY MEYER, and RANDALL MINAS, Defendants. KENNETH MATNEY, Counter-Plaintiff, v. FIFTH THIRD BANK, Counter-Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
This matter is before the Court on Kenneth Matney's Motion for Leave to File Amended Counter-Claim Against Fifth Third Bank [DE 134], filed by Defendant Kenneth Matney on September 11, 2012, and on Plaintiff Fifth Third Bank's Motion to Strike Defendant Kenneth Matney's Reply in Support of His Motion for Leave to File Amended Counterclaim [DE 139], filed by Plaintiff Fifth Third Bank ("Fifth Third") on October 13, 2012. Both motions are fully briefed and ripe for review.
This litigation stems from a loan agreement between Fifth Third and Double Tree Lake Estates LLC ("Double Tree"), under which Fifth Third made various loans to Double Tree. Double Tree used the proceeds of those loans to purchase and continue developing an existing residentialcommunity, Double Tree Lake Estates ("the development"). The loans were personally guaranteed by Matney, Anthony Meyer, and Randall Minas.
Fifth Third initiated this cause of action on June 29, 2011, when the lot sales allegedly slowed to a pace insufficient to service the indebtedness on the development.
Fifth Third amended its Complaint in February 2012. Defendant Matney filed his Counterclaim against Fifth Third on March 5, 2012, alleging three counts: Breach of Good Faith and Fair Dealing (Count I), Tortious Interference with Matney's Settlement Agreement and Matney's Economic and Business Relationships (Count II), and Civil Conspiracy (Count III).
On March 26, 2012, Fifth Third filed its Answer to Matney's Counterclaim.
On May 31, 2012, Fifth Third filed a Motion for Summary Judgment on its Amended Complaint.
On July 27, 2012, the parties filed a joint motion to stay the case pending the outcome of mediation. On August 16, 2012, the Court stayed this matter, including discovery, pending the outcome of scheduled mediation. However, on August 29, 2012, the parties filed a Motion to Establish Case Management Deadlines, which informed the Court that the parties had not concluded mediation but nevertheless asked the Court to adopt case management deadlines. Therein, Fifth Third also asked to withdraw the pending Motion for Summary Judgment.
On September 4, 2012, the Court granted the parties' requests, withdrawing the Motion for Summary Judgment, setting case management deadlines, and granting Matney up to and including September 11, 2012, in which to file a Motion for Leave to File Amended Counterclaim.
Matney filed the instant Motion for Leave to File Amended Counterclaim on September 11, 2012. Fifth Third filed a response on September 27, 2012, and Matney filed a reply on October 9, 2012.
On October 13, 2012, Fifth Third filed the instant Plaintiff Fifth Third Bank's Motion to Strike Defendant Kenneth Matney's Reply in Support of His Motion for Leave to File Amended Counterclaim. Matney filed a response on November 13, 2012, and Fifth Third filed a reply on November 26, 2012.
In the proposed Amended Counterclaim, Matney states that he is seeking damages on various legal theories including breach of contract, constructive fraud, negligence, negligent mismanagement, and tortious interference with contractual relations on the part of Fifth Third as it pertains to Matney.
Matney alleges in the proposed Amended Counterclaim that, in 2004, Matney was presented with an opportunity to purchase the Double Tree Lake Estates development of approximately 600 acres from David Lasco. Because he did not have the financial wherewithal to purchase the development outright, Matney put together a joint venture that included himself, Meyer, Minas, and Fifth Third, which Matney describes as the "Double Tree Enterprise."
Matney alleges that, pursuant to the formal documents, Fifth Third was a lender and not an owner; however, the true substance of Fifth Third's conduct, accompanied by the special relationship of trust and confidence that existed between Fifth Third through its officers, employees, and agents on one hand and Minas, Matney, and Meyer on the other, rendered the venture a joint venture among Fifth Third, Matney, Meyer, and Minas. The day-to-day operations of the development were to be managed by Matney and Meyer. Fifth Third and Minas were to provideinitial capital and strategic business advice; however, Matney provided over $1.7 million in capital directly to the purchase.
Matney alleges that, in form and operation, the ownership arrangement of the development became: (a) Matney and Meyer through the entity by the name KA Enterprises, LLC; (b) Minas through Sanim Management Company LLC, owner and manager of MDRM LLC; and (3) Fifth Third under the auspices of various loan documents, agreements, and contracts among the named parties, including a Subordination Agreement between Matney, Lasco, and Fifth Third.
Matney alleges that Fifth Third intentionally excluded Matney from any meaningful participation in the management of the Double Tree Enterprise. Matney alleges that Fifth Third participated in the drafting of a proposed Third Amendment to the Double Tree Operating Agreement that would have given actual control to Minas and control over the management, operation, and profit potential of the Double Tree Enterprise. He alleges that Fifth Third colluded with Minas in an effort to try to obtain enforcement of the proposed unsigned Third Amendment to the Double Tree Operating Agreement through an arbitration process. Attorney Terrill D. Albright became the arbitrator and, after a hearing, ordered enforcement of the unsigned and unconsented proposed Third Amendment to the Double Tree Operating Agreement. Later, following the arbitration hearing and the summer 2008 arbitration ruling, it was discovered that Attorney Albright had failed to disclose that his law firm had represented Fifth Third in numerous matters. Matney alleges that Albright would have been disqualified had this fact been previously known. Matney alleges that, although attorneys for Minas in conjunction with Fifth Third had attempted to get the arbitrator's proposed order entered of record by Lake Superior Court Judge John R. Pera, Judge Pera entered an order on October 16, 2008, staying the arbitration award.
Matney alleges that, despite Judge Pera's order, Fifth Third has continued to rely upon and utilize the unsigned Third Amendment to the Double Tree Operating Agreement, in part through a series of attorney opinion letters from various attorneys working for Minas. Matney alleges that Fifth Third, in conjunction with the active participation of Minas, has continued to allow an increase to the global debt limit of this joint venture over the objection of the other owners, including Matney. He alleges that Fifth Third and Minas have allowed the removal of assets from the joint venture in the form of disbursements made directly to Minas, his attorneys, his accountants, his affiliates, and office staff at the development.
Matney alleges that Fifth Third, in conjunction with and in direct collusion with Minas and his affiliated entities, including but not limited to MDRM, LLC; FKAT Properties, LLC; Inverness Estates, LLC; City Securities Corporation; and Sanim Management LLC, entered into a series of at least nine additional loan transactions, amendments, modifications and/or restatements after having locked Matney out of the management and operations of the Double Tree Enterprise. All these actions were allegedly undertaken with no prior notice to Matney of the additional debt or the use to which debt loan proceeds were being applied. Matney alleges that Fifth Third did not provide relevant information, full disclosure, or any documentation, all while attempting to make the nine new loan transactions retroactive to May 2004, which was the time of the original loan agreement to purchase the Double Tree development.
Matney alleges that Fifth Third failed to timely and meaningfully notify and inform Matney of Fifth Third's intentions to enter into various new agreements that would increase the global borrowing limits, which allowed for significant increases in the amount of debt accumulated by Minas during his sole operation of the Double Tree Enterprise, all of which resulted in additionalprofits for Fifth Third. In addition, he alleges that Fifth Third's elected course of dealing brought unwanted and unknown financial risk for Matney. He alleges that Fifth Third misrepresented the scope and duration of Matney's Personal Guaranty as to the Double Tree Enterprise and accompanying debt obligations by informing him that loans made by Fifth Third were term loans and would require a new personal guaranty upon renewal. He alleges that, instead, Fifth Third and Minas attempted to make all subsequent loan obligations retroactive, all to the detriment of Matney.
On April 9, 2009, Matney and Minas entered into a Settlement Agreement that called for cash payments to Matney as well as payments to Lasco and others in the nature of defense and indemnification totaling millions of dollars. This Settlement Agreement, in part, was to take care of Fifth Third's failure to enforce its rights and obligations pursuant to the Subordination Agreement between Matney, Lasco, and Fifth Third.
Federal Rule of Civil Procedure 15 governs amendments to pleadings and provides, in part:
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