W. Run Student Hous. Assocs., LLC v. Huntington Nat'l Bank

• Citation: 712 F.3d 165
• Decision Date: 11 February 2013
• Docket Number: No. 12–2430.,12–2430.
• Parties: WEST RUN STUDENT HOUSING ASSOCIATES, LLC; Campus View JMU, LLC; Mt. Tabor Village, LLC, Appellants v. HUNTINGTON NATIONAL BANK.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

712 F.3d 165

WEST RUN STUDENT HOUSING ASSOCIATES, LLC; Campus View JMU, LLC; Mt. Tabor Village, LLC, Appellants

v.HUNTINGTON NATIONAL BANK.

No. 12–2430.

United States Court of Appeals, Third Circuit.

Submitted Under Third Circuit

LAR 34.1(a) Feb. 11, 2013.

Filed: April 4, 2013.

James R. Cooney, Robert O. Lampl, Robert O. Lampl & Associates, Rudy A. Fabian, Pittsburgh, PA, for Appellants.

Kathleen J. Goldman, Peter S. Russ, Renee M. Schwerdt, Buchanan Ingersoll & Rooney, Pittsburgh, PA, for Appellee.

Before: HARDIMAN, and ALDISERT, Circuit Judges and STARK ^*, District Judge.

OPINION OF THE COURT

HARDIMAN, Circuit Judge.

West Run Student Housing Associates, LLC (West Run), Mt. Tabor Village, LLC (Mt. Tabor), and Campus View JMU, LLC (Campus View) (collectively, Plaintiffs) appeal the District Court's order dismissing their amended complaint against Huntington National Bank. We will affirm in part, vacate in part, and remand.

I

This lawsuit arose from three commercial real estate development projects for student housing at West Virginia University (the West Run Project), Virginia Tech (the Mt. Tabor Project), and James Madison University ¹ (the Campus View Project). The same group of individuals (Sponsors) sponsored each project.

A. The West Run Project

In August 2006, the Sponsors formed West Run to facilitate the construction and management of off-campus housing at West Virginia University in Morgantown, West Virginia. West Run retained CBRE/Melody, a real estate broker, for the purpose of securing bank financing for the project. CBRE/Melody provided prospective lenders with confidential and proprietary information, consisting of “an ‘underwriting,’ a ‘bank package,’ a loan request, a front end appraisal of the project ..., and financial information for each of the Sponsors,” in conjunction with its efforts to secure bank financing. Amended Compl. ¶ 9. In September 2006, West Run selected Sky Bank to provide financing for the project, and the bank agreed to loan West Run $39,975 million. On July 1, 2007, Huntington National Bank (Huntington) became the successor-by-merger to Sky Bank's rights and obligations under the West Run loan transaction.

The West Run Project was to be constructed in two phases. Phase I was completed on schedule in August 2007. The apartments completed during that phase had an occupancy rate of 95% in the fall of 2007. Construction of Phase II was completed in August 2008.

In the fall of 2008, as the West Run Project was being completed, construction commenced on an unrelated student housing project known as the Copper Beech Townhomes (Copper Beech), located across the street from the West Run Project. By the spring of 2009, a number of the Copper Beech units were available for rent in competition with those in the West Run Project. According to the amended complaint, it was at this time that West Run first learned that “Huntington had participated, to the extent of $20 million, in the financing of Copper Beech.” Id. ¶ 32. West Run also alleges that Huntington divulged to the Copper Beech developers the proprietary West Run information that had been provided by CBRE/Melody to Huntington's predecessor, Sky Bank.

The West Run Project's overall occupancy dropped from 95% in the fall of 2007 to 64% in the fall of 2009, which greatly decreased West Run's available cash flow. Consequently, West Run anticipated that it would be unable to make the principal and interest payments due to Huntington by December 1, 2009. West Run contends that its “occupancy crisis was caused by Huntington's financing of Copper Beech, with its resulting diminishment of [the West Run Project's] revenues.” Id. ¶ 40.

B. The Mt. Tabor Project

In October 2007, the Sponsors formed Mt. Tabor to facilitate the construction and management of an off-campus housing project at Virginia Tech in Blacksburg, Virginia. The Mt. Tabor Project was smaller than the West Run Project, consisting of only thirty-eight condominium units. Huntington agreed to finance this development with a $6 million loan, to be disbursed in installments. The loan agreement, however, required Mt. Tabor to sell at least twenty-nine units before Huntington was required to fund the entire project. In the spring of 2009, as the project was nearing completion, Huntington refused to provide the last construction advance, and the project failed.

C. The Campus View Project

In February 2008, the Sponsors formed Campus View to facilitate the construction and management of an off-campus housing project at James Madison University in Harrisonburg, Virginia. The Campus View Project consisted of one hundred sixty-eight condominium units to be constructed in three phases. Huntington agreed to finance the Campus View Project with a $10.5 million revolving line of credit, which was secured by a mortgage on the property. The loan agreement required Campus View to sell at least fifty-four units before Huntington was required to fund Phase II. In or around August 2009, Huntington refused to extend further construction advances to Campus View.

II

On December 22, 2011, Plaintiffs filed a three-count verified complaint in the Court of Common Pleas of Allegheny County, Pennsylvania. In Count I, West Run alleged that Huntington had breached its duty of good faith and fair dealing by financing the Copper Beech project. In Counts II and III, Campus View and Mt. Tabor each alleged breach of contract based on Huntington's failure to provide funds under their respective construction loan agreements.

On January 20, 2012, Huntington removed the case to the United States District Court for the Western District of Pennsylvania. A week later, Huntington filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The motion argued that West Run's claim (Count I) should be dismissed for failure to state a plausible claim. It also argued that Mt. Tabor's and Campus View's claims (Counts II and III) should be dismissed because the number of pre-sold condominium units listed in the complaint established that they had sold an insufficient number of units to require Huntington to disburse additional funds pursuant to the construction loan agreements.²

In response to Huntington's motion to dismiss, Plaintiffs filed an amended complaint, which simply omitted the factual allegations regarding the number of pre-sold units. The amended complaint also included a new count, listed as Count I, in which West Run alleged that Huntington had breached its duty of good faith and fair dealing by disclosing confidential information it had received from CBRE/Melody to the Copper Beech developers. The other counts were renumbered Counts II, III, and IV, in the same order as they originally appeared.

Huntington then filed a motion to dismiss the amended complaint, again arguing that West Run's claims should be dismissed for failure to state a plausible claim. As to the claims of Mt. Tabor and Campus View, Huntington argued that they failed to state a claim based on the admissions as to the pre-sales deficiencies contained in the original complaint.

The District Court granted the motion and dismissed the amended complaint in its entirety with prejudice. W. Run Student Hous. Assocs., LLC v. Huntington Nat'l Bank, 2012 WL 1739820, at *7 (W.D.Pa. May 15, 2012). This appeal followed.³

III

Plaintiffs raise three arguments on appeal: (1) the District Court erred when it concluded that West Run did not plead sufficient facts to support its allegation that Huntington provided confidential information regarding the West Run Project to the Copper Beech developers; (2) the District Court erred when it concluded that Huntington had no duty to West Run to refrain from financing Copper Beech; and (3) the District Court erred by deeming the unit pre-sale numbers listed in the superseded original complaint to be binding judicial admissions. We will examine each argument in turn.

A

The District Court determined that West Run alleged insufficient facts to support the conclusion that Huntington provided any proprietary information regarding the West Run Project to the Copper Beech developers. We agree. To survive a motion to dismiss, the factual allegations of a complaint “must be enough to raise a right to relief above the speculative level” and the complaining party must offer “more than labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

Just as the complaint in Twombly contained only “an allegation of parallel conduct and a bare assertion of conspiracy,” 550 U.S. at 556, 127 S.Ct. 1955, here West Run offers no more than an allegation that confidential information was disclosed and a bare assertion that this violated the duty of good faith and fair dealing. West Run does not plead facts regarding the nature of the disclosed information, who disclosed it, or when it was disclosed. Nor does the amended complaint contain any corroborating factual averments that confidential information was disclosed at all. “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complainthas alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’ ” Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (quoting Fed.R.Civ.P. 8(a)(2)). Accordingly, we will affirm the District Court's dismissal of Count I.

B

In Count II, West Run alleges that Huntington breached the implied duty of good faith and fair dealing by providing a loan to Copper Beech for a competing housing development near the West Run Project. The District Court dismissed this claim after observing that the loan agreement between West Run and Huntington contained no language that would bar Huntington from making loans to Copper Beech, and finding that West Run's broad...