Horseshoe Entertainment v. General Elec.

• Decision Date: 21 February 1997
• Docket Number: No. 4:96-CV-0695 CAS.,4:96-CV-0695 CAS.
• Citation: 990 F.Supp. 737
• Parties: HORSESHOE ENTERTAINMENT, L.P., et al., Plaintiffs, v. GENERAL ELECTRIC CAPITAL CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Missouri

990 F.Supp. 737

HORSESHOE ENTERTAINMENT, L.P., et al., Plaintiffs, v. GENERAL ELECTRIC CAPITAL CORPORATION, Defendant.

No. 4:96-CV-0695 CAS.

United States District Court, E.D. Missouri, Eastern Division.

February 21, 1997.

COPYRIGHT MATERIAL OMITTED

Martin M. Green, Partner, Mitchell A. Margo, Partner, Green and Schaaf, St. Louis, MO, for Horseshoe Entertainment, a, Lousiana Limited Partnership, plaintiff.

Rodney W. Sippel, Markus P. Cicka, Husch and Eppenberger, St. Louis, MO, for General Electric Capital Corporation, defendant.

MEMORANDUM AND ORDER

SHAW, District Judge.

This diversity matter is before the Court on defendant's motion to dismiss.

Background. This action was removed from this Circuit Court of St. Louis County, Missouri pursuant to 28 U.S.C. § 1332. In their Petition, plaintiffs allege they operate riverboat casinos in Louisiana and Mississippi. Plaintiffs executed four installment notes (the "Notes") and other financing documents and agreements securing the Notes in favor of defendant General Electric Capital Corporation's ("GE") successors in interest, to finance the purchase of certain gaming equipment. GE purchased the Notes and other instruments in August 1995. Plaintiffs allege they negotiated an oral agreement with GE to prepay the Notes without a prepayment premium, and then expended significant time and expense in obtaining replacement financing in reliance on the oral agreement. Plaintiffs allege that after they had closed on replacement financing, GE refused to accept their tendered prepayment without the prepayment premium, and plaintiffs were forced to pay GE a prepayment premium of $308,783.94 in order to meet their obligations to the new lenders.

Plaintiffs' five-count complaint asserts state law claims for negligent misrepresentation (Count I), fraud (Count II), detrimental reliance (Count III), breach of contract (Count IV), and quantum meruit (Count V). GE moves to dismiss each count pursuant to Federal Rule of Civil Procedure 12(b)(6). GE asserts several grounds for its motion to dismiss, but its primary argument is based on the provisions of the Missouri statute of frauds governing credit agreements, R.S.Mo. § 432.045.1-.2 (1994) GE also moves to dismiss Count II for failure to plead fraud with particularity as required by Fed.R.Civ.P. 9(b), or in the alternative, that plaintiffs be required to state their fraud claim with more particularity. Plaintiffs oppose the motion.

Standard of Review. Attached to GE's reply memorandum in support of its motion to dismiss are an affidavit and several exhibits. A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) "must be treated as a motion for summary judgment when matters outside the pleadings are presented and not excluded by the trial court." Woods v. Dugan, 660 F.2d 379, 380 (8th Cir.1981) (per curiam). When matters outside the pleadings are presented on a motion to dismiss, a court may either treat the motion as one to dismiss and exclude the matters outside the pleadings, or treat the motion as one for summary judgment and provide the parties with notice and an opportunity to provide further materials. See Gibb v.. Scott, 958 F.2d 814, 816 (8th Cir.1992).

Constructive notice that the court will consider matters outside the pleadings is sufficient where the nonmoving party has had an adequate opportunity to respond to the summary judgment motion and there is a lack of any showing that any material facts were disputed or missing from the record. See Madewell v. Downs, 68 F.3d 1030, 1048 (8th Cir.1995); Davis v. Johnson Controls, Inc., 21 F.3d 866, 867 (8th Cir.1994); Angel v. Williams, 12 F.3d 786, 788-89 (8th Cir. 1993); Gibb v. Scott, 958 F.2d at 816. The Court finds this to be the situation here and will construe GE's motion to dismiss as a motion for summary judgment.

The standards applicable to summary judgment motions are well settled. Pursuant to Federal Rule of Civil Procedure 56(c), a court may grant a motion for summary judgment if all of the information before the court shows "there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The initial burden is placed on the moving party. City of Mt. Pleasant, Iowa v. Associated Elec. Cooperative, Inc., 838 F.2d 268, 273 (8th Cir.1988) (the moving party has the burden of clearly establishing the non-existence of any genuine issue of fact that is material to a judgment in its favor). Once this burden is discharged, if the record does in fact bear out that no genuine dispute exists, the burden then shifts to the nonmoving party who must set forth affirmative evidence and specific facts showing there is a genuine dispute on that issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In determining whether the moving party has met its burden, all evidence and inferences are to be viewed in the light most favorable to the non-moving party. Johnson v. Enron Corp., 906 F.2d 1234, 1237 (8th Cir.1990).

Discussion. With this standard in mind, the Court turns to the merits of GE's motion to dismiss, construed as a motion for summary judgment.

A. Count IV. GE first argues that Count IV, which alleges breach of an oral contract, is barred by the Missouri statute of frauds governing credit agreements, § 435.045.1-.2. The statute prohibits a debtor from maintaining an action on or defense to a credit agreement unless the agreement is in writing. See § 435.045.2. A credit agreement is defined as "an agreement to lend or forbear repayment of money, to otherwise extent credit, or to make any other financial accommodation." § 435.045.1.

Plaintiffs respond that the statute does not apply because, inter alia, the Notes they signed do not contain the notice required by the statute. Under § 435.045.3, the prohibition against a debtor maintaining an action or defense except on a written agreement does not apply unless the written credit agreement contains the following language in ten-point boldface type:

Oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt including promises to extend or renew such debt are not enforceable. To protect you (borrowers(s)) and us (creditor) from misunderstanding or disappointment, any agreements we reach covering such matters are contained in this writing, which is the complete and exclusive statement of the agreement between us, except as we may later agree in writing to modify it.

R.S.Mo. § 435.045.3(1).

GE replies that Financing Agreements executed by plaintiffs in connection with the transaction at issue contain the statutory language required by § 435.045.3, and that the Notes incorporate the terms of the Financing Agreements. (See Def.'s Exs. A-D.) GE does not cite the provision of the Notes which incorporates the Financing Agreements.

It is undisputed the Notes themselves do not contain the statutory notice in question. (See Pl.'s Exs. A-D.) Each Note states it "is issued pursuant to and is secured by that certain Financing Agreement of even date herewith and the various agreements executed in connection therewith ...", id. at 1, but the Court does not find language incorporating the terms of the Financing Agreements. The Financing Agreements (the "Agreements") contain provisions which state:

(1) the Agreements contain the entire agreement of the parties with respect to the Loan; (2) all prior agreements, commitments, understandings, warranties and negotiations in connection herewith, if any, are hereby merged into this Agreement; and (3) no oral representations shall in any manner modify or explain any of the terms and conditions herein.

See Agreements, § 8.7(b)(1)-(3) at 13. Paragraph 8.7(b)(3) of the Agreements also contains the statutory notice language required by § 435. 045.3(1), although it is not set forth in boldface ten-point type.

The Court concludes that the notice language as set forth in the Agreements sufficiently complies with the requirements of the statute. The Court first finds that the Notes and Agreements, together with other related documents, comprise the "written credit agreement" between the parties under § 432.045. These documents refer to each other and are also clearly related to each other as integral parts of the parties' financing arrangement. Under Missouri law, several documents in combination may supply the essential terms of a contract, where the documents refer to each other or their contents show they are clearly related. See Smith v. International Paper Co., 87 F.3d 245, 247 (8th Cir.1996) (discussing requirements of a writing to satisfy Missouri statute of frauds); Vess Beverages, Inc. v. Paddington Corp., 941 F.2d 651, 654 (8th Cir.1991) (same) Thus, the written credit agreement between the parties contains the statutory notice language.

The fact that the statutory notice language is not in ten-point bold type does not require a different result. To date, no Missouri decisions interpret and apply this aspect of § 432.035. There is no legislative history available to aid in interpretation of the statute. Under these circumstances, the Court must attempt to determine what Missouri's highest court would conclude if faced with this question. See Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Courts in other states with similar credit agreement statutes have explained the purpose of these statutes is to limit lender liability claims based on assertions of breach of oral agreements to lend, to refinance or to forbear from enforcing contractual remedies, by requiring a writing as a prerequisite for a debtor to sue a lender. The statutes are intended to discourage lender liability litigation and promote certainty in credit agreements. See Whitney Nat'l Bank v. Rockwell, 661 So.2d 1325, 1329 (La.1995); Brown v. Founders Bank and Trust Co., ...