Highland Capital Mgmt. L.P. v. Bank of America, NA, Civil Action No. 3:10-CV-1632-L

• Decision Date: 07 November 2011
• Docket Number: Civil Action No. 3:10-CV-1632-L
• Parties: HIGHLAND CAPITAL MANAGEMENT, L.P., Plaintiff, v. BANK OF AMERICA, NATIONAL ASSOCIATION, Defendant.
• Court: U.S. District Court — Northern District of Texas

HIGHLAND CAPITAL MANAGEMENT, L.P., Plaintiff,

v.BANK OF AMERICA, NATIONAL ASSOCIATION, Defendant.

Civil Action No. 3:10-CV-1632-L

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

Dated: November 7, 2011

MEMORANDUM OPINION AND ORDER

Before the court is Defendant Bank of America's Motion to Dismiss, filed December 27, 2010. After carefully reviewing the motion, briefing, pleadings, and applicable law, the court grants Defendant Bank of America's Motion to Dismiss and dismisses with prejudice Plaintiff Highland Capital Management, L.P.'s ("Plaintiff") claims for breach of contract and promissory estoppel.

I. Factual and Procedural Background

Plaintiff brought this lawsuit against Defendant Bank of America, National Association ("Defendant") alleging claims for breach of contract and promissory estoppel.¹ The action was originally filed in the 191st Judicial District Court of Dallas County, Texas, and subsequently removed by Defendant to federal court on August 20, 2010, based on diversity jurisdiction.

Accordingly to Plaintiff's pleadings, the parties negotiated and reached an agreement in December 2009 regarding a transaction related to a bank debt trade. Although the alleged agreement was not reduced to writing and was negotiated via a number of e-mails and telephone calls, Plaintiff contends that the parties agreed to all material terms of the transaction. Plaintiff therefore contends that the resulting trade was final, binding and not subject to further revision or negotiation by Defendant. As explained herein, Plaintiff's belief in this regard is based in large part on its assertion that the transaction was governed by industry standard, as well as the Standard Terms and Conditions for Par/Near Par Trade Confirmations published by the Loan Syndications and Trading Associate, Inc. ("LSTA Standard Terms").

On December 27, 2010, Defendant moved to dismiss Plaintiff's contract and estoppel claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiff requested leave on January 18, 2011, to amend its pleadings. Defendant did not respond to Plaintiff's motion for leave but stated in its reply in support of the pending motion to dismiss that Plaintiff's "proposed changes are futile and do not result in a different conclusion; dismissal remains appropriate . . . ." Doc. 23. The court therefore granted Plaintiff's motion for leave, and Plaintiff filed its First Amended Complaint ("Complaint") on July 14, 2011. Neither party requested to supplement its briefing as to Defendant's Motion to Dismiss, although Plaintiff's Complaint was filed several months after briefing on Defendant's motion was complete. Accordingly, the court decides Defendant's Motion to Dismiss in light of Plaintiff's amended pleadings.

II. Standard for Rule 12(b)(6)—Failure to State a Claim

To defeat a motion to dismiss filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face."Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); Reliable Consultants, Inc. v. Earle, 517 F.3d 738, 742 (5th Cir. 2008); Guidry v. American Pub. Life Ins. Co., 512 F.3d 177, 180 (5th Cir. 2007). A claim meets the plausibility test "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (internal citations omitted). While a complaint need not contain detailed factual allegations, it must set forth "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citation omitted). The "[f]actual allegations of [a complaint] 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. (quotation marks, citations, and footnote omitted).

In reviewing a Rule 12(b)(6) motion, the court must accept all well-pleaded facts in the complaint as true and view them in the light most favorable to the plaintiff. Sonnier v. State Farm Mutual Auto. Ins. Co., 509 F. 3d 673, 675 (5th Cir. 2007); Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F. 3d 464, 467 (5th Cir. 2004); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). In ruling on such a motion, the court cannot look beyond the pleadings. Id.; Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999), cert. denied, 530 U.S. 1229 (2000). The pleadings include the complaint and any documents attached to it. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000). Likewise, "'[d]ocuments that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are centralto [the plaintiff's] claims.'" Id. (quoting Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993)).

The ultimate question in a Rule 12(b)(6) motion is whether the complaint states a valid claim when it is viewed in the light most favorable to the plaintiff. Great Plains Trust Co. v. Morgan Stanley Dean Witter, 313 F.3d 305, 312 (5th Cir. 2002). While well-pleaded facts of a complaint are to be accepted as true, legal conclusions are not "entitled to the assumption of truth." Iqbal, 129 S.Ct. at 1950 (citation omitted). Further, a court is not to strain to find inferences favorable to the plaintiff and is not to accept conclusory allegations, unwarranted deductions, or legal conclusions. R2 Invs. LDC v. Phillips, 401 F.3d 638, 642 (5th Cir. 2005) (citations omitted). The court does not evaluate the plaintiff's likelihood of success; instead, it only determines whether the plaintiff has pleaded a legally cognizable claim. United States ex rel. Riley v. St. Luke's Episcopal Hosp., 355 F.3d 370, 376 (5th Cir. 2004).

"If the interpretation of a contract is at issue, a court is 'not constrained to accept the allegations of the complaint in respect of the construction of the Agreement,' although all contractual ambiguities must be resolved in the plaintiff's favor." Banks v. Correctional Servs. Corp., 475 F. Supp. 2d 189, 195 (E.D.N.Y. 2007) (quoting Int'l Audiotext Network, Inc. v. Am. Tel. and Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995)). Because contract construction is generally decided as a matter of law, interpretation of a contract is generally suitable for disposition on a motion to dismiss for failure to state a claim upon which relief can be granted. Reinhardt v. Wal-Mart Stores, Inc., 547 F. Supp. 2d 346, 353 (S.D.N.Y. 2008) (quoting Revson v. Cinque & Cinque, 221 F.3d 59, 66 (2d Cir. 2000), and OBG Tech. Servs. v. Northrop Grumman Space & Mission Sys. Corp, 503 F. Supp. 2d 490, 514 (D. Conn. 2007)).

III. Analysis

A. Breach of Contract

Defendant contends that Plaintiff's Complaint fails to allege adequately the existence of a valid, enforceable contract and breach of the alleged contract. Because the LSTA Standard Terms state that they are governed by New York law and both parties acknowledge that Plaintiff's claims are governed by New York law, the court considers only whether Plaintiff has stated viable contract and promissory estoppel claims under New York law, even though the parties cite Texas law in the alternative. In any event, the result is the same, regardless of which law the court applies.

1. New York Contract Law

Under New York law, an unambiguous contract is construed as a matter of law. Metropolitan Life Ins. Co. v. RJR Nabisco Inc., 906 F.2d 884, 889 (2d Cir. 1990). A contract is unambiguous if it "has 'a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion.'" Sayers v. Rochester Tel. Corp. Supplemental Mgmt. Plan, 7 F.3d 1091, 1095 (2d Cir. 1993) (citation omitted). Courts must "give effect to [an unambiguous] contract as written and may not consider extrinsic evidence to alter or interpret its meaning." Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 573 (2d Cir. 1993). The terms of a contract are "not made ambiguous simply because the parties urge different interpretations." Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992). If a contract is subject to more than one reasonable interpretation and requires resort to extrinsic evidence of the parties' intent, the interpretation of the contract's meaning becomes a question of fact. Consarc Corp., 996 F.2d at 573. In interpreting a contract, the court gives effect to the contracting parties' intentions and reasonable expectations byattributing the "fair and reasonable meaning" to the words of the contract with the goal of reaching a "practical interpretation of the expressions of the parties." Metropolitan Life Ins. Co., 906 F.2d at 889.

Although a court may not consider extrinsic evidence in interpreting a contract, under New York law, it may consider extrinsic evidence such as trade usage or practice in determining whether a contract exists. See Baii Banking Corp. v. Atlantic Richfield Co., No. 86 Civ. 6651 (JFK), 1987 WL 14124, at *2 (S.D.N.Y. 1987). Unlike tort liability, contractual liability requires mutual consent by the parties. Teachers Ins. & Annuity Assoc. v. Tribune Co., 670 F. Supp. 491, 497 (S.D.N.Y. 1987). "It is fundamental to contract law that mere participation in negotiations and discussions does not create [a] binding obligation, even if agreement is reached on all disputed terms." Id.

2. The Parties' Contentions

Plaintiff's contract claim is based on its assertions that Defendant agreed in the latter part of 2009, via a number of e-mails and telephone...