Wells Fargo Bank, N.A. v. Peirce
| Decision Date | 12 August 2016 |
| Docket Number | Civil Action 4:16-cv-98 |
| Parties | WELLS FARGO BANK, N.A., Plaintiff, v. JAMES G. PEIRCE, et al, Defendants. |
| Court | U.S. District Court — Southern District of Texas |
On November 25, 2015, Third Party Plaintiffs James G. Peirce, Nancy Lee Peirce, and AEMSTAR EMS, Ltd. (collectively, "Third Party Plaintiffs" or the "Peirces") filed a Third Party Petition in state court (Doc. No. 1, Ex. 26) ("Complaint"). On January 14, 2016, Third Party Defendant U.S. Small Business Administration ("SBA") filed a Notice of Removal with the District Court (Doc. No. 1) ("Notice"). Pending before the Court are the Peirces' Motion to Remand (Doc. No. 7), the SBA's Motion to Dismiss the Original Third Party Petition (Doc. No. 8), the SBA's Motion to Dismiss the Amended Third Party Complaint (Doc. No. 17), the SBA's Motion to Dismiss the Second Amended Third Party Complaint (Doc. No. 26), and the Peirces' Motion to Refer the Case to Mediation (Doc. No. 28). On June 7, 2016, the District Court issued a notice referring nondispositive matters in this case for decision by this Court and dispositive matters for Report and Recommendation (Doc. No. 27). The Court RECOMMENDS that the SBA's Motion to Dismiss the Original Third Party Petition be DENIED AS MOOT, the SBA's Motion to Dismiss the Amended Third Party Complaint be DENIED AS MOOT, the SBA's Motion to Dismiss the Second Amended Third Party Complaint be GRANTED, and that the Peirces' Motion to Remand subsequently be GRANTED. The Court ORDERS that the Peirces' Motion to Refer the Case to Mediation be DENIED AS MOOT.
This suit arises out of alleged nonpayment on two loans Plaintiff Wells Fargo Bank, N.A. ("Wells Fargo") made to borrowers who are not parties to this litigation. On November 7, 2014, Wells Fargo filed suit against the guarantors of the loans, James G. Peirce, Nancy Lee Peirce, and AEMSTAR EMS, Ltd. in the 434th Judicial District Court of Fort Bend County, Texas (Doc. No. 1, Ex. 3). Wells Fargo alleged nonpayment of a U.S. Small Business Administration Note ("Loan 1") and a Business Direct Credit Application Agreement and Personal Guarantee ("Loan 2"). Id. ¶ 8. Wells Fargo alleged that the borrower under both loans failed to make payments and also defaulted by filing for bankruptcy proceedings. Id. ¶ 13. Wells Fargo asserted that all three Defendants are liable under Loan 1, because each signed an unconditional individual guarantee agreement, and that the debt owed is $239,617.77 "with interest accruing at the per diem rate of $28.35153." Id. ¶ 15-16. Wells Fargo further asserted that James G. Peirce and Nancy Lee Peirce are liable under Loan 2, because both signed a guarantee agreement contained in Loan 2, and that the debt owed is $35,818.38 "with interest accruing at the per diem rate of $4.80537." Id. ¶ 17-18. The Peirces answered Wells Fargo's Petition on January 9, 2015 (Doc. No. 1, Exs. 9, 10, & 11). On January 22, 2015, Wells Fargo filed an Amended Petition, which removed allegations concerning Loan 2 (Doc. No. 1, Ex. 12).
Wells Fargo moved for summary judgment (Doc. No. 1, Ex. 13). The state court held an oral hearing concerning the motion for summary judgment on August 31, 2015 (Doc. No. 1, Ex. 16). The Peirces filed an Amended Answer and Original Counterclaim on November 3, 2015, asserting fraudulent inducement, fraudulent non-disclosure, negligent misrepresentation, and entitlement to declaratory judgment against Wells Fargo in connection with both Loan 1 and Loan 2 (Doc. No. 1, Ex. 21). Also on November 3, 2015, the Peirces filed a Motion for Leave to File a Third Party Petition against the Small Business Administration (Doc. No. 1, Ex. 22). After a hearing, the state court entered an order granting the Peirces leave to file a Third Party Petition (Doc. No. 1, Exs. 23 & 25). The Peirces filed the Third Party Petition against the U.S. Small Business Administration on November 25, 2015 (Doc. No. 1, Ex. 26) ("Pet.").
The SBA removed the Peirces' Third Party Petition to the Southern District of Texas, along with Wells Fargo's Amended Petition, on January 14, 2016 (Doc. No. 1). On February 11, 2016, the Peirces filed a Motion to Remand the matter to state court (Doc. No. 7). The Peirces alleged causes of action against the SBA for fraudulent inducement, fraudulent non-disclosure, negligent misrepresentation, and declaratory judgment. Pet. ¶¶ 18-27. On February 19, 2016, the SBA filed a motion to dismiss (Doc. No. 8) ("1st Mot. Dismiss").
On March 2, 2016, the SBA amended their notice of removal, clarifying the reasons for removal, and responded to the motion to remand (Docs. No. 9 & 10). On March 18, 2016, the Peirces amended their Third Party Complaint, adding new factual allegations as well as a cause of action for negligence against the SBA (Doc. No. 12 ¶¶ 24-25) ("Am. Compl"). They also responded to the SBA's motion to dismiss (Doc. No. 13). On April 22, 2016, the SBA filed amotion to dismiss the Peirces' amended third party complaint (Doc. No. 17) ("2nd Mot. Dismiss").
On May 13, 2016, the Peirces amended their third party complaint a second time1, adding new factual allegations as well as a cause of action for contribution and indemnity against the SBA (Doc. No. 21 ¶¶ 26-27) ("2nd Am. Compl."). The Peirces also responded to the SBA's motion to dismiss (Doc. No. 22). On May 27, 2016, the SBA filed a motion to dismiss the Peirces' second amended third party complaint (Doc. No. 26) ("3rd Mot. Dismiss"). On June 17, 2016, the Peirces responded (Doc. No. 29). Additionally, the Peirces filed a motion seeking to have the case referred to mediation (Doc. No. 28). The SBA filed a response opposing referral (Doc. No. 30), and the Peirces filed a reply (Doc. No. 31).
In the most recent amended third party complaint, the Peirces allege the following: Wells Fargo claims that the Peirces owe a debt under Loan 1. 2nd Am. Compl. ¶ 9. The Peirces were not the borrowers under Loan 1, but Wells Fargo seeks payment of the debt under guarantee agreements all three defendants/third party plaintiffs signed. Id. In addition, Wells Fargo initially sought payment of a debt owed under Loan 2, but has since dropped that claim. Id. ¶ 10. The Peirces are not the applicant under Loan 2, but Wells Fargo sought payment under aguarantee agreement James G. Peirce and Nancy Lee Peirce signed. Id. The SBA guaranteed both loans. Id. ¶¶ 9-10.
The Peirces allege that, in connection with the execution of both the Loan 1 and Loan 2 guarantees, Wells Fargo employees engaged in "trickery, artifice, and/or device . . . by deceiving the [Peirces] into believing it was not necessary for the [Peirces] to thoroughly review and understand the guarantee documents and language;" and by distracting, interfering with, and depriving the Peirces the opportunity to thoroughly review the documents. Id. ¶ 11. These same employees, who were purportedly working on behalf of Wells Fargo and the SBA, allegedly made "material and fraudulent representations and promises" that Wells Fargo and the SBA would only ever look to the borrower or applicant for payment, and not to the Peirces as guarantors, to induce them to execute the guarantees. Id. ¶ 12. Wells Fargo and the SBA were allegedly engaged in a joint enterprise as it relates to Loan 1 and Loan 2, and the Peirces' allege that the SBA possessed a duty to ensure that Wells Fargo did not "make misrepresentations or false promises to persons such as the Peirces." Id. ¶ 15. Both loans were "made on SBA forms, under the express auspices of the SBA." Id. ¶ 16. The Peirces further allege that "the SBA owed a duty to borrowers and guarantors that its lenders were not engaged in trickery, artifice, and/or misrepresentation in securing these loans and/or loan guarantees." Id. ¶ 16.
In its Motions to Dismiss, the SBA argues that the Peirces' claims for fraudulent inducement, fraudulent non-disclosure, and negligent misrepresentation should be dismissed for lack of subject-matter jurisdiction, 1st Mot. Dismiss at 4-7; 2nd Mot. Dismiss at 5-9; 3rd Mot. Dismiss at 5-7, and for failure to state a claim upon which relief can be granted, 2nd Mot. Dismiss at 7-9; 3rd Mot. Dismiss at 5-6. The SBA also asserts that the Peirces' claim for negligence should be dismissed for lack of subject-matter jurisdiction. 2nd Mot. Dismiss at 9-11; 3rd Mot. Dismiss at 7-9. The SBA further argues that the Peirces' claim for declaratory judgment and associated attorney's fees must be dismissed for failure to state a claim. 1st Mot. Dismiss at 7-10; 2nd Mot. Dismiss at 11-12; 3rd Mot. Dismiss at 9. Finally, the SBA argues that the Peirces' claim for contribution and indemnity must also fails, as without factual or legal basis. 3rd Mot. Dismiss at 4.
"Federal Rule of Civil Procedure 12(b)(1) governs challenges to a court's subject-matter jurisdiction." Patty v. United States, 2015 WL 1893584, at * 3 (S.D. Tex. Apr. 27, 2015) (Rosenthal, J.). "Under Rule 12(b)(1), a claim is properly dismissed for lack of subject-matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the claim."In re FEMA Trailer Formaldehyde Prods. Liab. Litg., 668 F.3d 281, 286 (5th Cir. 2012) (quotation omitted). Rule 12(b)(1) challenges to subject-matter jurisdiction may be facial or factual attacks. See, e.g., Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 440 (6th Cir. 2012); Russell v. City of Houston, 808 F. Supp. 2d 969, 972 (S.D. Tex. Apr. 25, 2011) (Werlein, J.) (citing Paterson v. Weinberger, 644 F.2d 521, 523 (5th...
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