Viridis Corp. v. Tca Global Credit Master Fund, LP

• Decision Date: 03 January 2018
• Docket Number: No. 17-11237,17-11237
• Parties: VIRIDIS CORPORATION, a Nevada corporation, BECK-FORD CONSTRUCTION, LLC, a Texas corporation, et al., Plaintiffs-Appellants, v. TCA GLOBAL CREDIT MASTER FUND, LP, a Grand Cayman corporation, ROBERT D. PRESS, individually, et al. Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

VIRIDIS CORPORATION, a Nevada corporation,BECK-FORD CONSTRUCTION, LLC, a Texas corporation, et al., Plaintiffs-Appellants, v. TCA GLOBAL CREDIT MASTER FUND, LP, a Grand Cayman corporation,ROBERT D. PRESS, individually, et al. Defendants-Appellees.

No. 17-11237

UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

January 3, 2018

[DO NOT PUBLISH]

D.C. Docket No. 0:15-cv-61706-UU

Appeal from the United States District Court for the Southern District of Florida Before WILSON and ROSENBAUM, Circuit Judges, and ROBRENO,^* District Judge.

ROBRENO, District Judge:

Viridis Corporation ("Viridis"), Beck-Ford Construction, LLC ("Beckford"), LCTI Low Carbon Technologies International, Inc. ("LCTI"), Ideal National Mechanical Corporation ("Ideal"), Commercial & Institutional Mechanical, Ltd. ("C&I"), Sustainable Energy Properties, Inc. ("SEP"), WK Management Services, Inc. ("WKMS"), and Bryan Scott Jarnagin (collectively "Appellants" or "Borrowers"), appeal the order of the United States District Court for the Southern District of Florida dismissing in its entirety their Third Amended Complaint ("TAC") for failure to state claims upon which relief may be granted. TCA Global Credit Master Fund, LP ("Global"), TCA Fund Management Group ("Fund Management Group"), TCA Global Credit Fund Group, Ltd, Inc. ("Credit Fund Group"), Robert Press, and Donna Silverman (collectively "Appellees") were named as defendants in the TAC, which alleged statutory claims under RICO and the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"), and common law claims for usury, misrepresentation, conspiracy, and breach of contract. The claims all arose from high interest rate financing agreements pursuant to which Appellants borrowed significant funds. We have jurisdiction pursuant to 28 U.S.C.§ 1291. Because we conclude that the district court's dismissal order was too broadly drawn, we affirm in part and reverse in part.

I.

The history of the parties' commercial loan transactions is complex and lengthy.¹ The parties entered into a First Credit Agreement ("FCA") in November 2013 providing a credit facility² in the amount of $10 million secured by a first prior security interest in the Borrowers' collateral.³ The FCA contained a "lockbox" provision requiring the Borrowers' receivables to be accumulated in a designated account to be used to repay the loan. It also contained a release provision purporting to release any and all claims relating to or arising out of any of the loan documents executed by the parties and a waiver provision stating that each Borrower waived every present and future defense or claim against the lenders.

Unhappy with Global's failure to advance loan proceeds even though the value of the collateral exceeded the amount of the credit facility, in February 2014 Appellants requested that Global allow them to obtain financing from another lender. Global refused the request, and Appellants were unable to complete aplanned acquisition deal. At this same time, Global allegedly violated the lockbox agreement, impaired Appellants' cash flow, and left them without sufficient funds to pay their debts and finance their operations. In May 2014, the parties executed a First Amendment to the FCA to provide Appellants with additional working capital. This agreement also included release and waiver provisions.

Again unhappy with Global for withholding lockbox funds, Appellants sought refinancing of the debt from another lender in the summer of 2014. They secured a term sheet for a $6 million revolving credit line to repay the outstanding amount owed under the FCA and to cancel Global's first-priority security interest in the Borrowers' collateral. Global allegedly refused to cooperate with the new lender's due diligence efforts. In September 2014, Global issued a default letter to the Borrowers and represented to the new lender that the Borrowers had failed to comply with their obligations concerning the lockbox account and their reporting duties. Because of the default letter, the new lender refused to close the new loan. Appellants allege that one month before it issued the default letter, Global had unilaterally closed the lockbox account — making it impossible for the Borrowers to direct customer deposits to that account — and did not provide them with timely information about a replacement lockbox account established at a different bank.

Notwithstanding these difficulties, Global proposed that the Appellants accept financing in the form of a $500,000 credit advance from Global to acquireBeckford. Global allegedly required that a new borrower entity, Viridis, be incorporated in Nevada to consummate the Beckford acquisition. This resulted in the parties' execution of a Second Amendment to the FCA and a Second Replacement Revolving Note on October 24, 2014 in the amount of $3.77 million, representing the unpaid principal and interest and other fees due under the FCA, plus the new advance. The Second Amendment also contained release and waiver provisions.

In December 2014, Global's counsel prepared documents for a replacement credit facility of $4.1 million under a Second Credit Agreement ("SCA"). This was despite the fact that the $500,000 advance evidenced by the Second Amendment and the anticipated advance of $4.1 million in additional financing under the SCA would have been within the amount of credit facility already provided by the FCA. Global insisted on the new credit agreement. Shortly before closing, Appellant Jarnagin, the principal behind the corporate entity borrowers, was presented with numerous documents including a personal guaranty and a requirement that the borrowers under the FCA accept liability for the performance of the obligations of the borrowers under the SCA and the related loan documents. The SCA was executed on December 31, 2014. As a part of the documents contained in the SCA, Viridis, Beckford, and Jarnagin agreed to the following release provision:

14.20 Release. In consideration of the mutual promises and covenants made herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, each Credit Party hereby agrees to fully, finally and forever release and forever discharge and covenant not to sue the Lender Indemnitees, and each one of them, from any and all debts, fees, attorneys' fees, liens, costs, expenses, damages, sums of money, accounts, bonds, bills, covenants, promises, judgments, charges, demands, claims, causes of action, Proceedings, suits, liabilities, expenses, obligations or contracts of any kind whatsoever, whether in law or in equity, whether asserted or unasserted, whether known or unknown, fixed or contingent, under statute or otherwise, from the beginning of time through the Effective Date, including any and all claims relating to or arising out of any financing transactions, credit facilities, notes, debentures, security agreements, and other agreements, including each of the Loan Documents, entered into by the Credit Parties with Lender and any and all claims that the Credit Parties do not know or suspect to exist, whether through ignorance, oversight, error, negligence, or otherwise, and which, if known, would materially affect their decision to enter into this Agreement or the related Loan Documents. The provisions of this Section shall survive the satisfaction and payment of the other Obligations and the termination of this Agreement.

SCA ¶ 14.20 (emphasis added).⁴ Additionally, as part of the SCA, Appellants LCTI, C&I, SEP, WKMS, and Ideal executed a Repayment Agreement containing the same release provision, and the following waiver clause:

11.4 WAIVER OF DEFENSES. THE CREDIT PARTIES WAIVE EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF

ACTION, COUNTERCLAIM OR SETOFF WHICH THE CREDIT PARTIES MAY HAVE AS OF THE DATE HEREOF TO ANY ACTION BY LENDER IN ENFORCING THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. THE CREDIT PARTIES WAIVE ANY IMPLIED COVENANT OF GOOD FAITH AND RATIFIES AND CONFIRMS [sic] WHATEVER LENDER MAY DO PURSUANT TO THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AS OF THE DATE OF THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER GRANTING ANY FINANCIAL ACCOMMODATION TO BORROWER.

Repayment Agreement § 11.4 (capitalization and underlining in original).

All proceeds from the SCA, minus the fees deducted by Global, were used by Jarnagin and his Nevada entity Viridis to acquire Beckford. As a result of the closing, Global obtained a first-priority lien on the Borrowers' and Beckford's assets. Global's first-lien position, together with the guarantees from Jarnagin, allegedly diminished Appellants' ability to obtain financing from any other lender because Global would need to give its express consent.

By February 2015, Global began withholding amounts due to Beckford and Ideal from the lockbox without explanation or notice. In March 2015, when Jarnagin asked about their alleged misuse of the lockbox, Global began to ask for accelerated payments of the principal, despite Jarnagin's request for an extension of the maturity date in accordance with the terms of the SCA. Appellees Silverman and Press, Global's highest-ranking executives, sent an e-mail to Jarnagin, stating that they would cause Global to issue default notices, after whichthey would appoint bankers to take control of the businesses if Jarnagin continued to question or object to their use of the lockbox or Global's request for increased payments. In a March 2015 e-mail, Press renewed the threats he made earlier, advising Jarnagin that the Borrowers must do what Global demanded because, as he told Jarnagin at an earlier meeting, "[t]his is not a discussion of equals" and Global "is [as] serious as a tumor."

Between 2014 and 2015, Jarnagin continued to seek refinancing from another lender. In April 2015, Jarnagin requested Silverman provide a payoff amount for the SCA in connection with a commitment letter...