Hoops v. United Bank
| Decision Date | 21 November 2022 |
| Docket Number | Civil Action 3:22-0072 |
| Parties | JEFFREY A. HOOPS and PATRICIA HOOPS, Individually and together as Husband and Wife, Plaintiffs, v. UNITED BANK, Defendant/Counter Claimant, v. CLEARWATER INVESTMENT HOLDINGS, LLC and JEFFREY A. HOOPS and PATRICIA HOOPS, Individually and together as Husband and Wife, Counter Defendants. |
| Court | U.S. District Court — Southern District of West Virginia |
Pending before the Court is Counter Defendants Clearwater Investment Holdings, LLC and Jeffery and Patricia Hoops's Motion to Dismiss Counter Claimant United Bank's Complaint for Declaratory Judgment. ECF No. 9. For the reasons herein, the Motion is DENIED.
Counter Claimant United Bank was a creditor of Blackjewel, LLC (“Blackjewel”), a West Virginia coal company partly owned by Counter Defendant Jeffrey Hoops, who also acted as CEO. Compl. ¶¶ 9-10, 12, ECF No. 1-1. United Bank was also a creditor of Clearwater, a Delaware limited liability company (“LLC”). Id. ¶¶ 3, 52. In April 2019, Clearwater and United Bank entered into a loan agreement, granting Clearwater an $11 million line of credit. Answer & Countercl. ¶ 14, ECF No. 5. Patricia and Jeffrey Hoops were members of Clearwater and acted as its guarantors under the loan agreement with United Bank. Compl. ¶ 52. The Clearwater Loan Agreement contained a series of “Affirmative Covenants,” including a broad indemnification provision. Answer & Countercl. ¶ 19-20.
This case stems from United Bank's alleged improper freezing of the bank accounts of Clearwater, Blackjewel, and the Hoops couple. Compl. ¶ 1. In addition to catalyzing the case at hand, this incident led Blackjewel and related debtors to file an Adversary Proceeding in the Southern District of West Virginia's Bankruptcy Court in June 2020, alleging that United Bank tortiously interfered with their attempts to obtain financing for Clearwater. Answer & Countercl. ¶ 21-23. As of the issuance of this Memorandum Opinion that proceeding is unresolved. See Blackjewel et al. v. United Bank, No. 3:20-ap-0300.
Counter Defendants initiated this action by filing their Complaint in state court on December 30, 2021. ECF No. 1. United Bank timely removed the action to this Court on February 10, 2022. Id. On March 2, 2022, United Bank filed its Answer (ECF No. 5), which included a Counterclaim for Declaratory Judgment. In the sole count Counterclaim, United Bank requested that the Court adjudicate the indemnity provision contained in the loan agreement between United Bank and Defendants. United Bank asks that the Court find that Counter Defendants must indemnify the Bank if it is held legally responsible for claims brought against it in the related bankruptcy proceeding. On March 14, 2022, Counter Defendants filed a Motion to Dismiss United Bank's Complaint for Declaratory Judgment under Rules 12(b)(1) and (6). ECF No. 9. United Bank responded on March 28, 2022 (ECF No. 14) and Counter Defendants Replied on April 8, 2022 (ECF No. 20). On August 2, 2022, the Court dismissed Clearwater from the action as a plaintiff. ECF No. 28. At that time, the Court noted that Clearwater remained as a Counter Defendant in the present dispute. Id.
A motion to dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure raises the fundamental question of whether a court is competent to hear and adjudicate the claims brought before it. It is axiomatic that a court must have subject matter jurisdiction over a controversy before it can render any decision on the merits. Challenges to jurisdiction under Rule 12(b)(1) may be raised in two distinct ways: “facial attacks” and “factual attacks.” Thigpen v. United States, 800 F.2d 393, 401 n.15 (4th Cir. 1986), rejected on other grounds, Sheridan v. United States, 487 U.S. 392 (1988). A “facial attack” questions whether the allegations in the complaint are sufficient to sustain the court's jurisdiction. Id. If a “facial attack” is made, the court must accept the allegations in the complaint as true and decide if the complaint is sufficient to confer subject matter jurisdiction. Id.
On the other hand, a “factual attack” challenges the truthfulness of the factual allegations in the complaint upon which subject matter jurisdiction is based. In this situation, a “district court is to regard the pleadings' allegations as mere evidence on the issue and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.”[1]Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991) (citing Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982); Trentacosta v. Frontier Pac. Aircraft Indus., 813 F.2d 1553, 1558 (9th Cir. 1987)). To prevent dismissal, “the nonmoving party must set forth specific facts beyond the pleadings to show that a genuine issue of material fact exists.” Id. (citations omitted). A dismissal should only be granted in those instances in which “the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law.” Id. (citations omitted).[2]
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must contain “a short and plain statement of the claim showing [the plaintiff] is entitled to relief.” Fed.R.Civ.P. 8(a)(2). While the facts alleged in the complaint need not be probable, the statement must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). In considering the plausibility of a plaintiff's claim, the Court accepts all factual allegations in the complaint as true. Id. Still, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citation omitted).
Determining whether a complaint states a plausible claim is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. If the court finds from its analysis that “the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Id. (quoting, in part, Fed.R.Civ.P. 8(a)(2)).
Nonetheless, a plaintiff need not show that success is probable to withstand a motion to dismiss. Twombly, 550 U.S. at 556 ().
Under the Declaratory Judgment Act (“the Act”), a district court, in “a case of actual controversy within its jurisdiction .... may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). The Act grants district courts the ability to hear pleas for declaratory judgments but allows courts the discretion to abstain from such cases. Wilton v. Seven Falls Co., 515 U.S. 277, 286-87 (1995). Here, United Bank has sought a declaratory judgment as to Counter Defendants' duty to “indemnify and hold harmless” United Bank against claims brought by the debtors in the bankruptcy action. Answer & Countercl. ¶¶ 35-36. In their 12(b)(1) Motion to Dismiss for Lack of Jurisdiction, Counter Defendants argue that United Bank lacks standing, or in the alternative, that its injuries are “so contingent on future factors” that the Court should decline to exercise its discretionary authority under the Act to hear the case. Pls.' [Counterdefs.'] Mot. to Dismiss Def.'s [Counter Claimant's] Compl. for Decl. J. 3-4. This is a facial attack on the Court's jurisdiction under Rule 12(b)(1); Counter Defendants' challenge is to the sufficiency of the Counterclaim to support standing. Id. Therefore, the Court will accept the allegations in the Counterclaim as true when evaluating the Motion to Dismiss. See Adams, 697 F.2d at 1219.
If United Bank lacks standing to bring this claim, this Court lacks authority to hear the case, regardless of the Act. Federal courts are courts of limited jurisdiction, bound by the confines of Article III, § 2 of the Constitution of the United States to only have the competency to hear “cases or controversies.” The Supreme Court has found that standing under Article III requires an “irreducible minimum,” such that the plaintiff must have (1) suffered an injury-in-fact, (2) which is fairly traceable to the defendant's alleged behavior, and (3) is redressable by the relief sought from the court. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). “To establish injury in fact, a plaintiff must show that he or she suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1548 (2016) (quotations omitted). Ripeness, like standing, is a constitutional and prudential doctrine that limits federal courts' jurisdiction to the “cases” and “controversies” described in Article III of the Constitution. The doctrine's “basic rationale is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in...
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