NCB Mgmt. Servs., Inc. v. Fed. Deposit Ins. Corp.

• Decision Date: 14 February 2012
• Docket Number: Civil Action No. 11–00700 (CKK).
• Citation: 843 F.Supp.2d 62
• Parties: NCB MANAGEMENT SERVICES, INC., Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORP., as Receiver for Advanta Bank Corp., Draper, Utah, Defendant.
• Court: U.S. District Court — District of Columbia

843 F.Supp.2d 62

NCB MANAGEMENT SERVICES, INC., Plaintiff,

v.FEDERAL DEPOSIT INSURANCE CORP., as Receiver for Advanta Bank Corp., Draper, Utah, Defendant.

Civil Action No. 11–00700 (CKK).

United States District Court, District of Columbia.

Feb. 14, 2012.

James Douglas Baldridge, Lauren E. Ingebritson, Venable, LLP, Washington, DC, for Plaintiff.

Andrew Jared Dober, Federal Deposit Insurance Corporation, Arlington, VA, for Defendant.

MEMORANDUM OPINION AND ORDER

COLLEEN KOLLAR–KOTELLY, District Judge.

Plaintiff NCB Management Services, Inc. (“NCB”) brings this action against the Federal Deposit Insurance Corporation (“FDIC”), in its capacity as the receiver for Advanta Bank Corporation (“Advanta”), a failed financial institution in Utah that was closed by state authorities in March 2010. In this action, NCB claims that, after the FDIC was appointed as the receiver for Advanta, it breached a pre-existing services agreement between NCB and Advanta by failing to submit timely payment under the terms of the agreement, breached the implied covenant of good faith and fair dealing by attempting to “retroactively repudiate” the agreement, and improperly denied NCB's claim for compensation from the receivership estate. Currently before the Court is the FDIC's [8] Motion to Dismiss. Upon careful consideration of the parties' submissions, the relevant authorities, and the record as a whole, the Court shall GRANT–IN–PART and DENY–IN–PART the FDIC's Motion to Dismiss. Specifically, the Motion shall be GRANTED insofar as it seeks dismissal of NCB's claim for breach of the implied covenant of good faith and fair dealing (Count III) and shall be DENIED in all other respects, including insofar as it seeks dismissal of NCB's claim for de novo judicial review of its claim against the receivership estate (Count I) and its claim for breach of contract (Count II).

I. BACKGROUND

Prior to its failure, Advanta was one of the largest credit card issuers in the small business market. In furtherance of this line of business, Advanta contracted with various debt collection companies to collect on delinquent accounts. Beginning in January 2005, NCB was one of those debt collection companies. Compl. ¶ 5. Over the years, Advanta and NCB entered into a series of written agreements defining the contours of their contractual relationship. Id. For purposes of convenience and consistent with the parties' usage, the Court shall simply refer to those agreements in the singular as the “Collection Agreement.” The facts stated below are gleaned from the allegations in the Complaint and the documents attached to the Complaint or incorporated therein.

Under the Collection Agreement, NCB was paid a base hourly rate for its debt collection services, coupled with a potential bonus hourly rate tied to NCB's collection performance. Compl. Ex. A (Fifth Addendum to Collection Agreement) § 3. Advanta was required to remit payment to NCB within ten days of receipt of an appropriate invoice. Id. Of particular relevance to this case, the Collection Agreement contemplated that NCB would provide collection services to Advanta for a period of indefinite duration. Id. § 6. Either party could terminate the agreement “by giving the other party at least 90 days prior written notice of its intent to terminate.” Id. During the ninety-day termination period, NCB was obligated to “continue to provide services to [Advanta]” and Advanta was required to “pay NCB for each month” in accordance with the aforementioned compensation scheme. Id. § 3. In addition, thirty days into the termination period, Advanta had the option to reduce the number of hours of services provided by NCB each month by up to one-third of the targeted goal in place at the beginning of the termination period. Id.

While the Collection Agreement was still in effect, Advanta failed. On March 19, 2010, the Utah Department of Financial Institutions closed Advanta and appointed the FDIC as the receiver. Compl. ¶ 8. Despite this development, NCB was still required to perform debt collection services under the terms of the Collection Agreement. Id. ¶ 9. NCB did so, with the FDIC's full knowledge and consent. Id.

On August 2, 2010, the FDIC sent NCB a “formal termination notice” indicating that it had “decided to exercise its option to terminate [the Collection Agreement] under the provision found in Section 3.” Decl. of Andrew J. Dober (“Dober Decl.”) Ex. A (Formal Termination Notice) at 1.¹ The FDIC also indicated that it had engaged a third party to “take[ ] over the servicing and administration of the Advanta Bank Corp. portfolio as of August 1, 2010.” Id. Since Section 3 of the Collection Agreement obligated NCB to “continue to provide services” for a ninety-day period after receipt of the FDIC's formal termination notice, NCB was required to perform debt collection services to and including October 31, 2010. Compl. Ex. A (Fifth Addendum to Collection Agreement) § 3. In turn, the FDIC was required to “pay NCB for each month” during the termination period—namely, August, September, and October 2010. Id.

On August 30, 2010, NCB acknowledged receipt of the FDIC's formal notice of termination. Compl. ¶ 13. At the same time, NCB sent the FDIC an invoice in the amount of $774,646, allegedly reflecting the amount due to NCB for debt collection services rendered in the month of August 2010. Id. NCB also inquired whether the FDIC intended to reduce the number of hours provided by NCB for the upcoming month. Id. The FDIC never paid the invoice or acknowledged NCB's correspondence. Id. ¶ 14.

On September 16, 2010, NCB sent a second invoice to the FDIC, again in the amount of $774,646, allegedly reflecting the amount due to NCB for debt collection services rendered in the month of September 2010. Id. NCB also included in its correspondence an account statement showing an outstanding balance of $1,549,292, allegedly reflecting the total amounts invoiced for August and September. Id. NCB also inquired again whether the FDIC intended to reduce the number of hours provided by NCB for the upcoming month. Id. That same day, the FDIC informed NCB that it would not be paying the outstanding invoices and that it was considering “retroactively repudiating” the agreement pursuant to its statutory powers as the receiver. Id. ¶¶ 15–16. The FDIC told NCB that it should expect written notification of its decision within three weeks. Id.

On October 4, 2010, before the FDIC sent written notification of its decision, NCB sent a third invoice to the FDIC, again in the amount of $774,646, allegedly reflecting the amount due to NCB for debt collection services rendered in the month of October 2010. Id. ¶ 17. In addition, NCB included an account statement showing an outstanding balance of $2,323,938, allegedly reflecting the total amounts invoiced for August, September, and October. Id.

The next day, October 5, 2010, the FDIC formally notified NCB that it was repudiating the Collection Agreement pursuant to its statutory powers as the receiver. Id. ¶ 18. The FDIC's notice provides, in part:

The Receiver has determined that [the Collection Agreement] is burdensome and that the disaffirmance of said agreement(s) will promote the orderly administration of [Advanta's] affairs. The purpose of this letter is to inform you that the Receiver has elected to disaffirm the above referenced Agreement to the fullest extent, if any, that it represents an enforceable obligation of [Advanta] or the Receiver. * * * The disaffirmance ... will be effective as of the date of this letter. However, the termination notice date under the Agreement of August 2, 2010 remains in effect.

Dober Decl. Ex. B (Formal Repudiation Notice) at 1–2.² The notice concludes by informing NCB that the FDIC's repudiation of the agreement “gives [NCB] a claim against the receivership estate” and instructs NCB how to go about filing a proof of claim. Id. at 2.

On October 19, 2010, NCB filed a proof of claim with the FDIC, seeking the $2,323,938 that it claims remained outstanding on the FDIC's account. Compl. ¶ 21; Dober Decl. Ex. C (Proof of Claim) at 1.³ On March 10, 2011, and again on March 17, 2011, the FDIC disallowed NCB's claim against the receivership estate, concluding that NCB had not satisfactorily proven its claim. Compl. ¶ 25 & Exs. B–C.

NCB then commenced this action on April 8, 2011. Its Complaint has three counts. Count I seeks de novo judicial review of the FDIC's disallowance of NCB's claim against the receivership estate. Id. ¶¶ 36–38. Count II alleges that the FDIC breached the Collection Agreement by failing to submit timely payment on the three invoices issued by NCB for services allegedly rendered in August, September, and October 2010. Id. ¶¶ 39–42. Count III alleges that the FDIC breached the duty of good faith and fair dealing implicit in the Collection Agreement by attempting to “retroactively repudiate” the agreement. Id. ¶¶ 43–45.

The FDIC filed the pending Motion to Dismiss on June 24, 2011. See Mem. of P. & A. in Supp. of FDIC–Receiver's Mot. to Dismiss (“Def.'s Mem.”). NCB filed its opposition on August 11, 2011. See NCB Management Services, Inc.'s Opp'n to FDIC–Receiver's Mot. to Dismiss (“Pl.'s Opp'n”). The FDIC filed a reply on September 1, 2011. See FDIC–Receiver's Reply to NCB's Opp'n to its Mot. to Dismiss. Accordingly, the motion is fully briefed and ripe for a decision. In an exercise of its discretion, the Court finds that holding oral argument would not be of assistance in rendering a decision. See LCvR 7(f).

II. LEGAL STANDARD

Under the Federal Rules of Civil Procedure, a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief,” Fed.R.Civ.P. (8)(a), “in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests,’ ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355...