Green Hills Dev. Co. v. Oppenheimer Funds, Inc.

• Decision Date: 23 January 2020
• Docket Number: CIVIL ACTION NO. 3:19-CV-416-DPJ-FKB
• Parties: GREEN HILLS DEVELOPMENT COMPANY, LLC, AND DELL GROUP HOLDINGS, LLC PLAINTIFFS v. OPPENHEIMER FUNDS, INC., D/B/A OPPENHEIMER ROCHESTER HIGH YIELD MUNICIPAL FUND, ET AL. DEFENDANTS
• Court: U.S. District Court — Southern District of Mississippi

GREEN HILLS DEVELOPMENT COMPANY, LLC,AND DELL GROUP HOLDINGS, LLC PLAINTIFFS v. OPPENHEIMER FUNDS, INC.,D/B/A OPPENHEIMER ROCHESTER HIGH YIELD MUNICIPAL FUND, ET AL. DEFENDANTS

CIVIL ACTION NO. 3:19-CV-416-DPJ-FKB

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF MISSISSIPPI NORTHERN DIVISION

January 23, 2020

ORDER

Plaintiff Green Hills Development Company, LLC, failed to pay taxes and special assessments for lots it owned in Stonebridge, a multi-use development in Rankin County, Mississippi. Green Hills eventually lost the property and says that the project's majority bondholder, Defendant Oppenheimer Funds, Inc., d/b/a Oppenheimer Rochester High Yield Municipal Fund, should have modified the special assessments to allow Green Hills to weather an economic downturn starting in 2007. Green Hills sued Oppenheimer, along with the bond Trustee, UMB Bank, and three entities UMB established to purchase the property after Green Hills's rights expired. Plaintiff Dell Group Holdings, LLC, a minority bondholder, asserts claims against the same Defendants, saying that they breached their duties to it. Defendants seek dismissal of all claims. For the following reasons, Defendants' Motion to Dismiss [4] is granted in part and denied in part.

I. Facts and Procedural History

The following facts come from the Complaint, the supporting documents, and the public record. In February 2007, the Rankin County Board of Supervisors created the Stonebridge Public Improvement District ("the SPID") to manage and finance public improvement services for property located within the newly established Stonebridge development. Plaintiff Green Hills was the developer and owned the majority of the property. State Ct. R. [1-1] at 11, Compl. ¶ 3.11.

Later that year, in September 2007, the SPID board issued bonds through a Trust Indenture between SPID as Issuer and Bank of the Ozarks as Trustee. Plaintiffs allege that Defendant Oppenheimer "was and remains" the majority bondholder under the Trust Indenture. Id. at 9, Compl. ¶ 3.6.¹ The bondholders were to be repaid through special assessments levied as taxes against landowners in the Stonebridge development; those assessments were first levied in 2008.

According to Plaintiffs,

[i]t was the intent and expectation of all parties to the Bond Transaction that the purchasers of the residential lots and commercial parcels within Stonebridge would pay the special assessments. It was never the intent or expectation of the parties that Green Hills, the developer, would or could fund these special assessments.

Id. at 10, Compl. ¶ 3.9. And Green Hills didn't. While residential lots in Stonebridge initially sold well, "[i]n late 2007 and throughout 2008, . . . the real estate market entered a severe recession" resulting in the cessation of lot sales by the end of 2007. Id. at 10-11, Compl. ¶ 3.10. That left Green Hills holding the bag for "the majority of the special assessments," which it never paid. Id. at 11, Compl. ¶ 3.11. Although Green Hills asked Oppenheimer and the Trustee to lower or forbear the special assessments, they refused. Id. at 12, Compl. ¶ 3.13.

"Ultimately due to the excessive unpaid tax debt, the unsold Stonebridge residential lots and commercial parcels . . . were struck off to the [S]tate of Mississippi." Id. at 11-12, Compl.¶ 3.12. Green Hills had, but did not exercise, a statutory right of redemption. Miss. Code Ann. § 27-45-3.

At some point, Oppenheimer "elected to replace Bank of the Ozarks with [Defendant] UMB Bank" as Trustee under the Trust Indenture. State Ct. R. [1-1] at 13, Compl. ¶ 3.16. "Oppenheimer holds both direct and indirect ownership interests" in UMB Bank. Id. And Plaintiffs say Oppenheimer made this appointment "as part of a strategy to take over Stonebridge and damage and destroy Green Hills'[s] relationship with the property owners and the homeowners association of Stonebridge and investment in Stonebridge." Id. Once in place as the Trustee, "Oppenheimer directed UMB Bank to create" Defendants Stonebridge Holdings I, LLC; Stonebridge Holdings II, LLC; and Stonebridge Holdings III, LLC (referred to by parties as the "SPEs") "for the designated purpose of purchasing the" lots Green Hills lost to the state. Id. at 14, Compl. ¶ 3.17. All three SPEs "are 100% owned by UMB Bank." Id. at 16, Compl. ¶ 3.23.

To facilitate these purchases, "UMB Bank entered an illegal Forbearance Agreement with administrative agencies of Rankin County and the Mississippi Secretary of State in an unauthorized and illegal effort to forbear on existing and future special assessments." Id. at 14, Compl. ¶ 3.18. In the most general terms, the May 2016 Forbearance Agreement waived the right to collect some delinquent and future special assessments and deferred collection on others during the term of the agreement. State Ct. R. [1-1] at 97-113, Forbearance Agreement. The SPEs then bought the property from the Mississippi Secretary of State approximately one month later. "Funding for the . . . purchase was made through a loan from Oppenheimer to UMB Bank in excess of $3 million." State Ct. R. [1-1] at 16, Compl. ¶ 3.21.

Green Hills has filed two lawsuits challenging these events. Green Hills first sued these same defendants—sans Oppenheimer—to challenge the validity of the sale. That case was ultimately heard in the Chancery Court of Rankin County, Mississippi, where the chancellor granted summary judgment in the defendants' favor, confirming both the validity of the taking and the subsequent sale. The Mississippi Supreme Court affirmed that ruling in part. It agreed that Green Hills had notice of its default and an opportunity to file an application to retain its ownership interest. Green Hills Dev. Co., LLC. v. Sec'y of State, 275 So. 3d 1077, 1081 (Miss. 2019). Thus, the Secretary of State was free to sell the property. Id. But the appellate court also found that Green Hills's ongoing involvement with Stonebridge gave it standing to challenge whether the subsequent sale to the SPEs violated Mississippi law. Id. The court therefore remanded the case to the chancery court, noting that Green Hills had requested discovery on the disputed sale. Id. at 1083.²

Of course, the pending state-court case is not the only suit Green Hills filed; it also filed this suit, with Dell Group, against Oppenheimer, UMB Bank, and the SPEs in Hinds County Circuit Court on May 16, 2019. The Complaint alleges the following claims under Mississippi law: (1) breach of the duty of good faith and fair dealing; (2) tortious interference with business relations; (3) breach of fiduciary duty; (4) unjust enrichment; (5) negligence, gross negligence, and wantonness; (6) punitive damages; (7) civil conspiracy; and (8) accounting. Defendants removed the case to this Court and moved for dismissal of all claims under Federal Rule of CivilProcedure 12(b)(6). The Court has personal and subject-matter jurisdiction under 28 U.S.C. § 1332.

II. Standard

When considering a motion under Rule 12(b)(6), the "court accepts 'all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.'" Martin K. Eby Constr. Co. v. Dall. Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004) (quoting Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999) (per curiam)). But "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To overcome a Rule 12(b)(6) motion, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555 (citations and footnote omitted). This standard "'simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of' the necessary claims or elements." In re S. Scrap Material Co., LLC, 541 F.3d 584, 587 (5th Cir. 2008) (quoting Twombly, 550 U.S. at 556)).

In considering a motion under Rule 12(b)(6), the Court should ordinarily "limit itself to the contents of the pleadings, including attachments thereto." Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000). The Court may also consider documents "referred to in the complaint[]" that "are central to the plaintiffs' claims." In re Katrina Canal Breaches Litig., 495 F.3d 191, 305 (5th Cir. 2007). Finally, "[t]he court may . . . refer to matters of publicrecord." Hicks v. Parker, 349 F. App'x 869, 870 (5th Cir. 2009). The documents that the parties submitted are proper for the Court's consideration of Defendants' motion.

III. Analysis

A. Breach of the Duty of Good Faith and Fair Dealing

Green Hills and Dell Group allege that "[a]s parties to the Bond Transaction, Oppenheimer and UMB Bank owe to the other parties to the Bond Transaction as well as Plaintiffs a duty to act with good faith and fair dealing in all matters involving the Bond Transaction." State Ct. R. [1-1] at 19, Compl. ¶ 4.2. "The duty of good faith and fair dealing arises from the existence of a contract between parties." Am. Bankers' Ins. Co. of Fla. v. Wells, 819 So. 2d 1196, 1207 (Miss. 2001) (citing Cenac v. Murry, 609 So. 2d 1257, 1272 (Miss. 1992)). The question presented is whether there is a contract between the parties.

Plaintiffs say there is, arguing first that "Green Hills was a party to agreements among the SPID Transaction, most notably the Acquisition Agreement" and the Trust Indenture. Pls.' Mem. [11] at 6. In a footnote, Plaintiffs list ten agreements they say encompass the "SPID Transaction," claiming that Green Hills is a party to "many" of them. Pls.' Mem. [11] at 2 n.2. But...