Hildene Opportunities Master Fund Ltd. v. Arvest Bank, Bannister Bancshares, Inc.
| Decision Date | 25 January 2016 |
| Docket Number | Case No. 14-1110-CV-W-ODS |
| Parties | HILDENE OPPORTUNITIES MASTER FUND LTD, Plaintiff, v. ARVEST BANK, BANNISTER BANCSHARES, INC. and JEFFREY JERNIGAN, Defendants. |
| Court | U.S. District Court — Western District of Missouri |
Pending are Defendants Arvest Bank's, Bannister Bancshares, Inc.'s, and Jeffrey Jernigan's Motions to Dismiss Plaintiff's Second Amended Complaint. Doc. #63, Doc. #65. The Motions are granted in part, denied in part, and deferred in part.
In 2003, Bannister Bancshares ("Bannister") created a wholly-owned trust subsidiary ("Bannister Trust") with U.S. Bank serving as Trustee and Jeffrey Jernigan ("Jernigan") served as an administrator of the Bannister Trust. At or around the same time, Bannister also entered into an indenture agreement ("Bannister Indenture") with U.S. Bank serving as Indenture Trustee. Second Amended Complaint ("SAC"), ¶ 10. Pursuant to the Bannister Indenture, Bannister issued $20 million in debentures. SAC, ¶ 3. Bannister Trust purchased the debentures Bannister issued. SAC, ¶¶ 4, 20. To raise the funds necessary to purchase the debentures, Bannister Trust issued 20,000 Capital Securities. SAC, ¶ 17. Under this arrangement, Bannister was required to make payments on the debentures to Bannister Trust, and Bannister Trust was required to make payments on the Bannister Trust Capital Securities. SAC, ¶ 22.
Bannister owned Union Bank and used the money raised from the issuance of the Bannister Debentures to fund Union Bank's operations. SAC, ¶ 16. Union Bank was Bannister's only substantial asset. SAC, ¶ 3. This is significant because Section 3.7 of the Bannister Indenture prohibited Bannister from selling or conveying "all or substantially all of its property" unless Bannister complied with Article XI of the Bannister Indenture. SAC, ¶ 24. Section 11.1 of Article XI of the Bannister Indenture permitted:
[The] sale, conveyance, transfer or other disposition of the property or capital stock of the Company...as an entirety, or substantially as an entirety, to any other Person...provided however, that the Company hereby covenants and agrees that, upon any such ...sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of (and premium, if any) and interest on all of the Debentures in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture...shall be expressly assumed...by the entity which shall have acquired such property or capital stock.
SAC, ¶ 25; Doc. #64-1 (emphasis in original). This provision (the "Successor Obligor Provision") prohibits Bannister from selling all or substantially all its property unless the purchaser of that property agrees to assume Bannister's obligations under the Bannister Indenture. SAC, ¶ 26. In June 2012, Arvest Bank ("Arvest") purchased Union Bank, but Arvest did not assume Bannister's obligations under the Bannister Indenture.1 SAC, ¶¶ 5, 27. Bannister has failed to make payments on the Debentures to Bannister Trust, and thus, Bannister Trust has failed to make payments on the Capital Securities. SAC, ¶ 60.
Based on these factual averments, Plaintiff Hildene Opportunities Master Fund, Ltd.,2 as assignee of U.S. Bank, asserts claims for Tortious Interference with Contract against Arvest (Count I), Breach of Contract against Bannister (Counts II and III), and Breach of Fiduciary Duty against Jernigan (Count IV).
The liberal pleading standard created by the Federal Rules of Civil Procedure requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam) (quoting Fed. R. Civ. P. 8(a)(2)). "Specific facts are not necessary; the statement need only 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Id. (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In ruling on a motion to dismiss, the Court "must accept as true all of the complaint's factual allegations and view them in the light most favorable to the Plaintiff[ ]." Stodghill v. Wellston Sch. Dist., 512 F.3d 472, 476 (8th Cir. 2008).
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. 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. 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. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.
Ashcroft v. Iqbal, 555 U.S. 662, 678 (2009) (internal quotations and citations omitted).
In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.
Arvest maintains Arkansas's three-year statute of limitations bars Plaintiff's tortious interference with contract claim. "A federal court sitting in diversity applies the statute-of-limitations rules of the forum." Great Plains Trust Co. v. Union Pacific R. Co., 492 F.3d 986, 992 (8th Cir. 2007) (citing Nettles v. Am. Tel. & Tel. Co., 55 F.3d 1358, 1362 (8th Cir. 1995)). "When a cause of action 'originates' in a state other than Missouri,...Missouri applies the foreign state's statute of limitations through Missouri's borrowing statute." Alvarado v. H & R Block, Inc., 24 S.W. 3d 236, 241-42 (Mo. Ct. App. 2000). The Missouri borrowing statute provides, "Whenever a cause of action has been fully barred by the laws of the state, territory or country in which it originated, said bar shall be a complete defense to any action thereon, brought in any of the courts of this state." Mo. Rev. Stat. § 516.190. Accordingly, Missouri's borrowing statute bars an action if (1) the action originated in another state and (2) the other state's statute of limitations bars the action. Alvarado, 24 S.W. 3d at 241-42. Missouri courts have construed the term "originated" to mean "accrued." Thompson by Thompson v. Crawford, 833 S.W.2d 868, 871 (Mo. 1992). Section 516.100 defines "accrued" as "when the damage resulting therefrom is sustained and is capable of ascertainment." "Missouri's borrowing statute pre-empts any conflict of laws question." Alvarado, 24 S.W.3d at 242.
Here, the parties dispute which state's law applies to Plaintiff's tortious interference claim. Plaintiff maintains Missouri law is applicable; Defendant Arvest maintains Arkansas law is applicable.
Plaintiff contends the Court should use the "most significant relationship test" to determine which state's law is applicable, but this test determines the substantive law to apply to the tortious interference claim. This test does not govern the law to apply for the statute of limitations. Regardless, Plaintiff states Arvest entered Missouri to negotiate the purchase of and conduct due diligence of Union Bank and to take actions which resulted in Bannister breaching the Indenture's Successor Obligor Provision. Plaintiff notes Arvest has many bank branches in Missouri and that DefendantsBannister and Jernigan are also located in Missouri. Plaintiff also claims the underlying Indenture and Bannister Trust transaction involved Missouri entities. Finally, Plaintiff argues that through Arvest's alleged tortious interference it obtained Missouri assets.
Arvest asserts that Arkansas is the home of its headquarters, and that it allegedly committed acts of tortious interference from its principal place of business. Arvest also asserts Plaintiff's principal allegation is that Arvest's counsel made misrepresentations to the Arkansas State Banking Board. Arvest argues that a tort generally accrues where the defendant's alleged wrongful conduct occurs, but the case Arvest cites in support of this argument is discussing accrual for determining venue, not statute of limitations. See State ex rel. Mo. Prop. & Cas. Ins. Guar. Ass'n v. Brown, 900 S.W. 2d 268, 271-72 (Mo. Ct. App. 1995).
Neither party adequately explained where the alleged tortious interference accrued. Plaintiff incorrectly applies the significant relationship test, and Arvest incorrectly applies a test for determining venue. Neither party explained when and consequently where (1) the damage resulting from the alleged tortious interference was sustained and (2) was capable of ascertainment. Accordingly, the Court currently is not in a position to determine whether Arkansas or Missouri law applies to the statute of limitations for the tortious interference claim.3 The Court denies Arvest's Motion to Dismiss on this basis.4
Arvest also argues Plaintiff fails to state a claim for tortious interference with contract. It is not clear to the Court whether Missouri or Arkansas law applies to this claim, but the elements of a tortious interference claim under each state's law are similar. Under Arkansas law, Plaintiff must establish (1) the existence of a valid contractual relationship, (2) knowledge of the relationship on the part of the interfering party, ...
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