Partner Reinsurance Company Ltd. v. RPM Mortgage, Inc.
| Decision Date | 01 July 2021 |
| Docket Number | 18 Civ. 5831 (PAE) |
| Parties | PARTNER REINSURANCE COMPANY LTD., Plaintiff, v. RPM MORTGAGE, INC., LENDUS, LLC, ERWIN ROBERT HIRT, TRACEY HIRT, and THE ROBERT HIRT AND TRACEY NAJARIAN HIRT REVOCABLE LIVING TRUST, Defendants. LENDUS, LLC, Counterclaim Plaintiff, v. PARTNER REINSURANCE COMPANY LTD., Counterclaim Defendant. |
| Court | U.S. District Court — Southern District of New York |
This case arises from a failed merger agreement between defendant RPM Mortgage, Inc. (“RPM”) and non-party Entitle Direct Group, Inc. (“Entitle”), in connection with which plaintiff Partner Reinsurance Company Ltd. (“PartnerRe”) served as the “Stockholder Representative” for Entitle. PartnerRe has sued RPM RPM's successor in interest, LendUS, LLC (“LendUS”), and those companies' owners (together with RPM and LendUS, “defendants”) alleging that RPM's failure to consummate the merger breached the merger agreement. See Dkt. 121 (“Am. Compl.”). Defendants contend that Entitle not they, breached the agreement, and have brought a counterclaim for breach of contract against PartnerRe.
Before the Court is defendants' motion for summary judgment which argues that PartnerRe lacks contractual standing to pursue this action, either in its role as Stockholder Representative or under Entitle's assignment to PartnerRe of its right to do so. Because the Court finds Entitle's assignment to PartnerRe valid, it denies that motion.
RPM was a California-based mortgage originator. Def. 56.1 ¶ 1. LendUS, RPM's successor in interest, is a Delaware limited liability company (“LLC”). Id. ¶ 2. Robert Hirt and Tracey Hirt are officers of LendUS, and indirectly own 96% of LendUS. Am. Compl. ¶ 86.
PartnerRe is a Bermuda LLC. Def. 56.1 ¶ 3. Entitle was a Delaware corporation with its principal place of business in Connecticut. Id. ¶¶ 4-5. During the period relevant here, PartnerRe held the majority of Entitle's Series B preferred stock. Id. ¶ 6.
Between 2016 and 2017, RPM and Entitle communicated and performed due diligence about RPM's potential acquisition of Entitle. Id. ¶ 7. Those negotiations led to a February 2017 Agreement and Plan of Merger between RPM, Entitle, PartnerRe as Stockholder Representative, and two entities formed for purposes of the merger, . Id. ¶¶ 8-10; Warns Decl., Ex. A (“Merger Agreement”). As relevant here, that agreement (1) identified PartnerRe as Entitle's Stockholder Representative and “Party” to the Agreement, with specific responsibilities and rights, Merger Agreement at 1, ¶ 11.12; and (2) contained the following anti-assignment clause:
Successors and Assigns. No Party to this Agreement may directly or indirectly assign any or all of its rights or delegate any or all of its obligations under this Agreement without the express prior written consent of each other Party to this Agreement. This Agreement shall be binding upon and inure to the benefit of the Parties to this Agreement and their respective successors and permitted assigns. Any attempted assignment in violation of this Section 11.6 shall be void.
On June 29, 2017, Entitle terminated the Merger Agreement. Id. ¶¶ 12-13. PartnerRe alleges that Entitle did so only after RPM breached the agreement by failing to attend a scheduled closing and then refusing to close the deal. Am. Compl. ¶ 97. Defendants deny that they breached the Merger Agreement. They claim that Entitle breached the agreement by concealing information from RPM and improperly communicating ex parte with Entitle's regulator. Dkt. 128 ¶¶ 37-38.[2]
After terminating the Merger Agreement, Entitle began communicating with other potential buyers. Def. 56.1 ¶ 13. At the end of 2017, it entered into a merger agreement with non-party Radian Title Services, Inc. (“Radian”). Id. ¶ 15; Warns Decl., Ex. E (“Radian Agreement”). That relationship proved more successful than Entitle's with RPM: in March 2018, Entitle and Radian closed their merger agreement. Def. 56.1 ¶ 16.
Also in March 2018—on the same day that Radian closed on its acquisition of Entitle— PartnerRe, Entitle, and Radian executed an Assignment and Cooperation Agreement. Id. ¶ 17; Warns Decl., Ex. F (“Assignment”). Under that agreement, Entitle granted PartnerRe the exclusive rights “in and to claims of any kind against RPM and its Affiliates and its and their officers or directors, or against any other Person, arising from or relating to the” failed merger agreement. Assignment ¶ 2.1.
On July 3, 2018, PartnerRe filed the original complaint against RPM and LendUS. Dkt. 6. On September 7, 2018, RPM answered and counterclaimed. Dkt. 15. On September 28, 2018, PartnerRe answered the counterclaim. Dkt. 18. On March 22, 2019, PartnerRe moved for judgment on the pleadings, under Federal Rule of Civil Procedure 12(c). Dkts. 32-34. On August 13, 2019, the Court granted that motion, but also granted RPM and LendUS leave to replead. Dkt. 59. On August 27, 2019, RPM and LendUS filed an amended counterclaim, Dkt. 60, which PartnerRe answered on September 11, 2019, Dkt. 68.
On October 8, 2019, after the close of fact discovery, PartnerRe moved for leave to file an amended complaint adding defendants under an alter-ego theory of liability. Dkts. 72-74. The same day, RPM and LendUS moved for a pre-motion conference to address their contemplated motion for summary judgment, which would argue, in part, that the Court lacked subject-matter jurisdiction over the case because PartnerRe lacked standing to pursue its claims. See Dkt. 76 at 1-3 & n.1. On October 15, 2019, PartnerRe responded, arguing, as relevant here, that the proper vehicle for defendant's jurisdictional motion was under Rule 12(h)(3), not summary judgment. Dkt. 77. On October 16, 2019, defendants filed another letter, seeking to stay briefing on PartnerRe's motion for leave to amend pending resolution of its motion to dismiss. Dkt. 78. The same day, PartnerRe responded, arguing that, if the Court were inclined to stay any deadlines, it should do so as to all pending deadlines. Dkt. 79. “In light of the substantial questions relating to standing (and thus this Court's jurisdiction) raised” by these filings, the Court adjourned the pending deadlines in the case, including briefing on PartnerRe's motion for leave to amend, and ordered defendants to move to dismiss under Rule 12(h). Dkt. 80.
On June 3, 2020, after briefing on that motion, the Court denied it. Dkt. 97. The Court held that it had subject-matter jurisdiction over PartnerRe's claims because PartnerRe had alleged an injury in fact caused by defendants, which an award of damages would redress, and therefore denied the Rule 12(h) motion. Id. at 3-4. The Court declined to address defendants' argument on contractual standing, instead reserving that issue for summary judgment. Id. at 6 n.2. The same day, the Court directed the parties to submit a proposed schedule for the remaining dates in the case, including PartnerRe's motion for leave to amend. Dkt. 98. On June 9, 2020, they did so. Dkts. 103-04.
On June 8, 2020, PartnerRe filed a renewed motion for leave to file an amended complaint adding alter-ego claims against Rob and Tracey Hirt and several entities they controlled. Dkt. 100. On November 13, 2020, after briefing, the Court granted that motion in part. Dkt. 120. The Court granted plaintiffs leave to add Rob and Tracey Hirt, and the trust through which they owned LendUS, as defendants, on an alter-ego theory of liability, but denied the motion as to the other proposed defendants. Id. The Court also directed the parties to submit a joint proposed scheduling order for the remaining dates in the case, as they had proposed doing after resolution of PartnerRe's motion for leave to amend. Id. at 31; see Dkts. 118-19.
On November 18, 2020, PartnerRe filed the Amended Complaint. Am. Compl. The same day, PartnerRe notified the Court that the parties could not agree on a joint proposed schedule, in part because of the extensive discovery sought by the new defendants. Dkt. 122. On November 19, 2020, the Court expressed its “dismay[]” at counsel's inability to agree on a schedule for completing the “very limited discovery outstanding in this case, ” and directed the parties to do so promptly, or, “[i]n the regrettable event” that they could not do so, to submit competing proposed schedules. Dkt. 123. On November 24, 2020, each side submitted competing proposed schedules. Dkts. 124-25. On November 25, 2020, the Court adopted PartnerRe's proposal. Dkts. 126-27. On November 30, 2020, defendants answered the Amended Complaint and counterclaimed. Dkt. 129. On December 7, 2020, PartnerRe answered the counterclaim. Dkt. 130.
On March 26, 2021, defendants filed a pre-motion letter regarding their contemplated motion for summary judgment. Dkt. 134. They sought leave to move for summary judgment both on the merits of each side's breach claims and on defendants' contractual-standing defense. On April 2, 2021, PartnerRe opposed that motion, arguing that the case should instead proceed to a bench trial. Dkt. 135. On April 12, 2021, the Court held a pre-motion conference. At that conference, the Court permitted defendants to move for summary judgment “limited to the issue of plaintiff's contractual standing, ” but held that, should that defense not prevail, the remaining, merits issues should proceed directly to a bench trial. Dkt. 141; see Dkt. 142 (“Tr.”) at 5, 14.
On April 27, 2021, defendants moved for summary judgment, Dkt 144, and filed a memorandum of law in support, Dkt. 145 (“Def. Mem.”); a Local ...
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