U.S. Bank Nat. Ass'n v. Ables & Hall Builders

• Decision Date: 27 October 2008
• Docket Number: No. 08 Civ. 2540(DC).,08 Civ. 2540(DC).
• Parties: U.S. BANK NATIONAL ASSOCIATION, Plaintiff, v. ABLES & HALL BUILDERS, a Kentucky General Partnership, and Ronnie Ables, Dennis Wade Ables, and, James A. Hall, its General Partners, Defendants.
• Court: U.S. District Court — Southern District of New York

582 F.Supp.2d 605

U.S. BANK NATIONAL ASSOCIATION, Plaintiff, v. ABLES & HALL BUILDERS, a Kentucky General Partnership, and Ronnie Ables, Dennis Wade Ables, and, James A. Hall, its General Partners, Defendants.

No. 08 Civ. 2540(DC).

United States District Court, S.D. New York.

October 27, 2008.

Sasson & Blaivas LLP, by Moshe Sasson, Esq., New York, NY, and Michael Best & Friedrich LLP, by Jacob E. Miota, Esq., Milwaukee, WI, for Plaintiff.

Traflet & Fabian, by Stephen G. Traflet, Esq., New York, NY, and Fultz Maddox Hovious & Dickens PLC, by John David Dyche, Esq., Louisville, KY, for Defendants.

OPINION

CHIN, District Judge.

In this breach of contract case, defendants move to dismiss plaintiffs complaint pursuant to Federal Rules of Civil Procedure 12(b)(2), (3), and (6). For the reasons set forth below, defendants' motion to dismiss is denied.

BACKGROUND

A. The Facts

For the purposes of this motion to dismiss, the facts in the complaint are assumed to be true and are construed in the light most favorable to plaintiff.

Plaintiff U.S. Bank National Association is a bank organized under the laws of the United States with its principal place of business in Minneapolis, Minnesota. (Complaint ("Compl.") ¶ 1). Defendant Ables & Hall Builders is a Kentucky general partnership organized under the laws of the state of Kentucky, and the individual defendants are adult residents and citizens of the state of Kentucky and general partners of Ables & Hall Builders (collectively, "defendants"). (Id. ¶¶ 2-5).¹

In June 2004, plaintiff and defendants entered into an interest rate swap transaction² related to a loan defendants had previously taken out from plaintiff. (Id. ¶6). The transaction was governed by three form agreements: the Master Agreement, dated June 29, 2004; the Schedule to the Master Agreement, dated June 29, 2004; and a Confirmation, dated July 2, 2004 and amended November 5, 2004 (collectively, the "Agreements"). (Id. ¶7). Each of the Agreements was signed by a representative—or a purported representative, a point I address below—of Ables & Hall Builders. The following appears on the signature page of the Master Agreement under "ABLES & HALL BUILDERS":

By: Ables & Hall Builders

Name: Darlene Ables [printed] Darlene Ables [signed]

Title: Bookkeeper/Owner

Date: 7/11/04

(Darlene Ables Decl., Exh. 3 at 14 (Master Agreement)). The following appears on the signature page of the Schedule to the Master Agreement under "ABLES & HALL BUILDERS":

By: Ables & Hall Builders

Name: Darlene Ables [signed]

Title: Bookkeeper/Owner

(Darlene Ables Decl., Exh. 4 at 7 (Schedule to the Master Agreement)). The following appears on the signature page of the Confirmation under "Ables & Hall Builders [,] a Kentucky Partnership":

By: Ronnie Ables [signed]

Title: Owner

(Jacob E. Miota Decl., Exh. A at 3 (Confirmation)).

Section 11(b) of the Master Agreement, entitled "Jurisdiction," provides, in relevant part, as follows:

With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:

(i) submits ... to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City ... and

(ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party.

Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction ... nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction.

Section 3(e) of the Schedule to the Master Agreement, entitled "Governing Law," provides as follows: "This Agreement will be governed by and construed in accordance with the laws of the State of New York (without reference to choice of law doctrine)."

On January 24, 2008, defendants refinanced their underlying debt to plaintiff with another financial institution. (Compl. ¶ 10). According to plaintiff, defendants' conduct constituted an "Additional Termination Event" under the Master Agreement. (Id.). Plaintiff notified defendants of the "Additional Termination Event" and designated an early termination date of January 31, 2008. (Id. ¶¶ 10-11). Based on a calculation set forth in the Master Agreement, plaintiff determined that defendants owed plaintiff a "Settlement Amount" of $456,188.52. (Id. ¶ 11). The Master Agreement authorizes plaintiff to charge interest on the money due at a rate equal to plaintiff's cost of funds plus 1%. (Id. ¶ 12). It also requires defendants to pay plaintiffs costs of collection, including attorneys' fees. To date no payment has been made. (Id.).

B. Procedural History

On February 5, 2008, plaintiff filed suit against defendants in New York state court, alleging breach of contract and demanding damages of $456,188.52, plus interest and attorneys' fees. On March 13, 2008, defendants removed the case to this Court under 28 U.S.C. § 1446(a).³

Subsequent to the filing of this action, defendants filed suit against plaintiff in the United States District Court for the Western District of Kentucky. On May 23, 2008, the District Court stayed that proceeding pursuant to the "first-to-file" rule. See Ables & Hall Builders v. U.S. Bank, N.A, No. 08 Civ. 175(JGH), 2008 WL 2168890, *2, 2008 U.S. Dist. LEXIS 41284, at **5-6 (W.D.Ky. May 23, 2008).

This motion followed.

DISCUSSION

Defendants move to dismiss the complaint for failure to state a claim upon which relief can be granted, for improper venue, and for lack of personal jurisdiction. Underlying each, of the grounds for defendants' motion is an affirmative defense—namely, that the Master Agreement, which contains the forum selection clause, is invalid because the party who purported to sign it on defendants' behalf lacked the authority to do so. I address each of defendants' grounds for dismissal, as well as their affirmative defense, seriatim.

A. Motion to Dismiss for Failure to State a Claim Upon Which Relief Can Be Granted

Defendants argue that the complaint does not allege a colorable claim for breach of contract because there is, in effect, no contract. That is, they argue that the Master Agreement is invalid on the ground that the party who signed it lacked the authority to do so. If there is no contract, defendants' argument goes, there can be no breach thereof.

1. Applicable Law

(a) Rule 12(b)(6) Standard

When considering a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept plaintiff's factual allegations as true and draw all reasonable inferences in its favor. See Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996); Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir.1994); Miotto v. Yonkers Pub. Sch., 534 F.Supp.2d 422, 425 (S.D.N.Y.2008). The Court may only consider the allegations in the complaint and "any documents that are either incorporated into the complaint by reference or attached to the complaint as exhibits." Blue Tree Hotels Inv. (Can.), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir.2004) (citing Taylor v. Vt. Dep't of Educ., 313 F.3d 768, 776 (2d Cir.2002)); accord Int'l Audiotext Network v. AT & T, 62 F.3d 69, 72 (2d Cir.1995) ("[W]hen a plaintiff chooses not to attach to the complaint or incorporate by reference a [document] upon which it solely relies and which is integral to the complaint, the court may nevertheless take the document into consideration in deciding the defendant's motion to dismiss, without converting the proceeding to one for summary judgment.") (internal citations and quotations omitted).

In Bell Atlantic Corp. v. Twombly, the Supreme Court announced the "retirement" of the familiar "no set of facts" language from Conley v. Gibson, 355 U.S. 41, 45-47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), and adopted in its place a "plausibility" standard. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1969, 167 L.Ed.2d 929 (2007). The Second Circuit has interpreted Bell Atlantic Corp. as follows:

[W]e believe the Court is not requiring a universal standard of heightened fact pleading, but is instead requiring a flexible "plausibility standard," which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible.

Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir.2007) (quoting Bell Atlantic Corp., 127 S.Ct. at 1969). On a motion to dismiss under Rule 12(b)(6) after Bell Atlantic Corp., a district court's inquiry is whether the complaint pleads "`enough facts to state a claim for relief that is plausible on its face.'" Patane v. Clark, 508 F.3d 106, 111-12 (2d Cir.2007) (quoting Bell Atlantic Corp., 127 S.Ct. at 1974).

"An affirmative defense may be raised by a pre-answer motion to dismiss under Rule 12(b)(6), without resort to summary judgment procedure, if the defense appears on the face of the complaint." Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 74 (2d Cir.1998) (emphasis added); Day v. Moscow, 955 F.2d 807, 811 (2d Cir.1992) ("[W]hen all relevant facts are shown by the court's own records, of which the court takes notice, the defense [res judicata] may be upheld on a Rule 12(b)(6) motion without requiring an answer."); Contractual Obligation Prods., LLC v. AMC Networks, Inc., No. 04 Civ. 2867(HBP), 2006 U.S. Dist. LEXIS 16402, at **19-20 (S.D.N.Y. Mar. 31, 2006) (holding that "[b]ecause the [defendant's affirmative] defense of payment is not clear from the face of the complaint, [defendant's] payment argument cannot be considered at this time.").

(b) Elements of a Breach of Contract Claim

The Master Agreement and the Schedule to the Master Agreement contain...