Wells Fargo Fin. Leasing, Inc. v. Griffin

• Citation: 970 F.Supp.2d 700
• Decision Date: 06 September 2013
• Docket Number: Civil Action No. 5:13–CV–00075–TBR.
• Parties: WELLS FARGO FINANCIAL LEASING, INC., Plaintiff v. David GRIFFIN and Charles Jones, Defendants.
• Court: U.S. District Court — Western District of Kentucky

970 F.Supp.2d 700

WELLS FARGO FINANCIAL LEASING, INC., Plaintiff

v.David GRIFFIN and Charles Jones, Defendants.

Civil Action No. 5:13–CV–00075–TBR.

United States District Court,

W.D. Kentucky,

Paducah Division.

Sept. 6, 2013.

Whitney M. Harmon, Baker Donelson Bearman Caldwell & Berkowitz, PC, Memphis, TN, for Plaintiff.

Charles M. Pritchett, Jr., Frost Brown Todd LLC, Kent Wicker, Reed Wicker PLLC, Louisville, KY, Jason M. Bergeron, William L. Campbell, Frost Brown Todd LLC, Nashville, TN, Richard W. Jones, Hurt & Jones, Murray, KY, for Defendants.

MEMORANDUM OPINION AND ORDER

THOMAS B. RUSSELL, Senior District Judge.

This matter is before the Court upon Defendant David Griffin's Motion to Dismiss, (Docket No. 18), and Defendant Charles Jones' Motion for Judgment on the Pleadings, (Docket No. 19). Plaintiff Wells Fargo Financial Leasing, Inc. (Wells Fargo), has responded to both Motions. (Docket Nos. 23 & 24, respectively.) Griffin has replied, (Docket No. 29); Jones has not replied, and the time to do so has now passed. These matter are now ripe for adjudication. For the reasons that follow, Griffin's and Jones' respective Motions will each be GRANTED.

BACKGROUND

Plaintiff Wells Fargo brings this action alleging breach of contract against Defendants Griffin and Jones. (Docket No. 1.) Wells Fargo's claims are based on two “Master Lease Agreements” (the “Master Agreements”) and the exhibits, schedules, and addenda attached thereto (with the Master Agreements, collectively referred to as the “Loan Documents”), whereby SE Book Company, LLC (SE Book), agreed to lease certain computer servers and software from VAR Resources, Inc. (VAR Resources). ( See Docket No. 1–1.) The Master Agreements were executed by Jones ¹ on behalf of SE Book on July 19, 2011, and accepted by VAR Resources on August 31, 2011.² (Docket No. 1–1, at 2, 9.) On July 19, 2011, Jones executed a “Personal Guaranty” agreement (the “Guaranty”), and on July 20, 2011, Griffin executed an identical “Personal Guaranty” agreement (also referred to hereinafter as “Guaranty” or, collectively, the “Guaranties”).

Then on December 29, 2011, VAR Resources assigned its interest in the Master Agreements to Wells Fargo pursuant to an assignment and bill of sale. SE Book failed to make payments due and owing under the lease when the monthly payments came due in October 2012 and thereby defaulted on the lease. Wells Fargo sent a demand letter to Griffin and Jones dated April 8, 2013, demanding payment pursuant to the Guaranties. ( See Docket No. 1–4.) Wells Fargo then initiated this action on May 15, 2013. ( See Docket No. 1.)

STANDARD

Motions to dismiss under Federal Rule of Civil Procedure 12(b)(6) and motions for judgment on the pleadings under Rule 12(c) are adjudicated using the same standard. JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577 (6th Cir.2007); Roger Miller Music, Inc. v. Sony/ATV Publ'g, LLC, 477 F.3d 383, 389 (6th Cir.2007). When considering either a Rule 12(b)(6) or 12(c) motion, the Court will presume that all the well-pleaded material allegations of the pleadings are true and will draw all reasonable inferences in favor of the nonmoving party. Total Benefits Planning Agency v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir.2008); JPMorgan, 510 F.3d at 581. However, the Court need not accept as true legal conclusions or unwarranted factual inferences. Total Benefits, 552 F.3d at 434;JPMorgan, 510 F.3d at 581–82.

Under Rule 12(b)(6) motion to dismiss, a complaint may be attacked for failure “to state a claim upon which relief can be granted.” “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “Similarly, a Rule 12(c) motion for judgment on the pleadings may be granted only if the moving party is clearly entitled to judgment,” JPMorgan, 510 F.3d at 581 (quoting S. Ohio Bank v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 479 F.2d 478, 480 (6th Cir.1973)), and “when no material issue of fact exists and the party making the motion is entitled to judgment as a matter of law,” id. at 582 (quoting Paskvan v. City of Cleveland Civil Serv. Comm'n, 946 F.2d 1233, 1235 (6th Cir.1991)).

DISCUSSION

Defendant Griffin moves to dismiss under Rule 12(b)(6), (Docket No. 18), and Defendant Jones moves for judgment on the pleadings under Rule 12(c), (Docket No. 19). Though their respective Motions are framed slightly differently, the crux of both Defendants' arguments is that the Guaranty Agreements at issue are not enforceable under Kentucky law. Wells Fargo, in separate but almost identical Responses, argues that the enforceability of the Guaranties is governed by Texas law, not Kentucky law. (Docket Nos. 23; 24.) Wells Fargo maintains however that the Guaranties are enforceable under the law of either state. The Court will first resolve the procedural issues concerning Jones' Rule 12(c) Motion before collectively analyzing the substantive issues common to both Defendants.

I. Defendant Jones' Motion for Judgment on the Pleadings (Docket No. 19)

Notwithstanding the fact that the pleadings have not yet closed and, thus, Jones' Rule 12(c) Motion is untimely, the Court will consider it as a motion to dismiss under Rule 12(b)(6). As a number of other district courts in this Circuit have noted, “the pleadings are not closed until all defendants have filed an answer, even when one defendant has filed a motion to dismiss instead of answering.” Nationwide Children's Hosp., Inc. v. D.W. Dickey & Son, Inc. Emp. Health & Welfare Plan, 2009 WL 5247486, at *1 (S.D.Ohio Dec. 31, 2009) (citing, e.g., Doe v. United States, 419 F.3d 1058, 1061 (9th Cir.2005)); see also Dunn–Mason v. JP Morgan Chase Bank Nat'l Ass'n, 2013 WL 4084676, at *4 (E.D.Mich. Aug. 13, 2013); Kowall v. GMAC Mortg., LLC, 2012 WL 884851, at *1 (E.D.Mich. Mar. 15, 2012); Horen v. Bd. of Educ. of Toledo Sch. Dist., 594 F.Supp.2d 833, 840 (N.D.Ohio 2009). Further, when an answer includes a counterclaim and denominates it as such, Rule 7(a) requires an answer to that counterclaim.

Jones filed his “Answer to Complaint and Counterclaim” on July 12, 2013. (Docket No. 17.) Jones thereafter filed his Rule 12(c) Motion on July 26, 2013. (Docket No. 19.) As of July 26, Griffin had filed a Rule 12(b)(6) Motion to Dismiss but not an answer. On August 1, 2013, Wells Fargo filed its Rule 12(b)(6) Motion to Dismiss relative to Jones' Counterclaim. (Docket No. 22.) Then on August 22, Jones filed what appears to be an amended Answer and Counterclaim, (Docket No. 28), and, on September 5, Wells Fargo filed its Motion to Dismiss that amended Counterclaim, (Docket No. 30). Thus, because Griffin has not filed an answer, not all Defendants have answered the Complaint. Additionally, Wells Fargo, the Counterclaim Defendant, has not answered either the original or amended Counterclaim filed by Jones. Thus, the pleadings in this matter are not “closed” for purposes of Rule 12(c).

The Court recognizes that courts maintain discretion in certain circumstances to consider a Rule 12(c) motion even where not all defendants have filed an answer. See Dunn–Mason, 2013 WL 4084676, at *4;Nationwide Children's Hosp., 2009 WL 5247486, at *2. Because none of the limited circumstances to justify doing so are present here, the Court finds no reason to excuse the requirement that the pleadings be closed before a Rule 12(c) motion may be considered. Still, as noted above, the standard for a Rule 12(c) motion is the same as that for a motion to dismiss under Rule 12(b)(6). Wells Fargo acknowledges this point in their Response, and, accordingly, argues against Jones' Motion under the applicable standard. As such, the Court will consider Jones' Motion as one under Rule 12(b)(b). Cf. Wagner v. Higgins, 754 F.2d 186, 187–88 (6th Cir.1985) (affirming district court's treatment of a motion styled under Rule 12(b)(6), which would have been untimely, as one seeking judgment on the pleadings under Rule 12(c), given that “the substance of the motion is plain” and “[n]o surprise or other prejudice to the plaintiff was claimed”).

II. Choice of Law

Wells Fargo insists that Texas law governs because of the choice-of-law provision contained in the Master Agreements. That clause states, in pertinent part:

APPLICABLE LAW; VENUE; JURISDICTION. The parties agree that this Master Agreement, each Schedule and Other Document shall be treated as though executed and performed in Dallas County, Texas, and any legal actions relating to the Agreement, any Schedule or any Other Document must be instituted in the courts of Dallas County, Texas or the United States District Court for the Northern District of Texas, which shall have exclusive jurisdiction.

(Docket No. 1–1, at 3, 10.) The Court need only conduct a choice-of-law analysis if a conflict exists between two states' laws. Asher v. Unarco Material Handling, Inc., 737 F.Supp.2d 662, 667–68 (E.D.Ky.2010) (citing Williams v. Toys “R” Us, 138 Fed.Appx. 798, 803 (6th Cir.2005)). At issue here is whether Kentucky law and Texas law conflict relative to the enforceability of guaranty agreements.

Kentucky Revised Statute § 371.065(1) sets forth Kentucky's statutory requirements for a valid, enforceable guaranty as follows:

No guaranty of an indebtedness which either is not written on, or does not expressly refer to, the instrument or instruments being guaranteed shall be valid or enforceable unless it is in writing signed by the guarantor and contains provisions specifying the amount of the maximum aggregate liability of the guarantor thereunder, and the date on which the guaranty terminates....

Or, as recently summarized by the Sixth Circuit: “The statute provides three ways a guaranty can be enforceable: (1) if it is written on the instrument it guarantees; (2) if it expressly refers to the...