RUDOLPH CONTRERAS, United States District Judge.
Plaintiff, Presidential Bank, FSB, loaned money to Defendant and secured the loans with real property owned by Defendants and rented to others. After Defendants defaulted on the loans, the parties entered into several loan modification agreements. One of these agreements gave Plaintiff significant control over Defendants' rental income. The modifications were unavailing in restoring harmony to the lending relationship, however, and Plaintiff subsequently brought suit alleging that Defendants had converted some rental income rather than turning it over to Plaintiff. In response, Defendants lobbed a salvo of affirmative defenses and counterclaimed that Plaintiff's execution of the modification agreements had, in fact, been wrongful and caused Defendants' financial difficulties. Plaintiff now moves for this Court to dismiss Counts I, II, III, V, VI, VII and IX of Defendants' counterclaim. Plaintiff does not move to dismiss Count IV or VIII of the counterclaim. For the reasons stated below, the Court will grant Plaintiff's motion.
In resolving Plaintiff's motion to dismiss, the Court "assume[s] the truth of the factual allegations of the counterclaim and liberally construe[s] them in favor of [counter-claimants]." Barnstead Broad. Corp. v. Offshore Broad. Corp., 886 F.Supp. 874, 878 (D.D.C. 1995). Defendants (and counter-claimants) are six District of Columbia limited liability companies
Plaintiff made various loans to each of the Defendant-LLCs, secured by various deeds of trust. ECF No. 20-23. Each Defendant-LLC owned associated real property which served as collateral on the loans. Compl. ¶¶ 24-34, ECF No. 1-1, Ex. A; see also Compl. ¶ 5, ECF No. 1-1, Ex. A. Defendants subsequently defaulted on the loans, and entered into a "Global Loan Modification Agreement" in October of 2014. Defs.' Answer at 23; see also Compl. ¶ 9. Pursuant to the Global Loan Modification Agreement, Defendants assert that Presidential later obtained a confessed judgment against Defendants in Maryland
Subsequent to the Forbearance Agreement, problems with paying the loans continued, and Presidential eventually foreclosed on the properties. Defs.' Answer at 29. However, Defendants claim that the income received by the properties should have been sufficient or nearly sufficient to pay their mortgages. See generally Defs.' Answer at 26-27; see also Defs.' Answer at 27 (stating that, based on "mortgage payments owed by Borrowers to Presidential" and "Borrowers' Net Operating Income," "Borrowers would have a negative cash flow of only $3,080.00"); Defs.' Answer at 27 ("For the better course of 2015 and early 2016, Presidential's motive operandi [sic], based upon its perceived authority under the [Forbearance] Agreement, was to block Borrowers' access to their funds; via their control of the Borrower's [sic] income, to impede Borrowers from making timely mortgage payments; similarly delay or reverse timely loan payments; apply payments retroactively to cover those payments they delayed or reversed...."). In 2016, Mr. Green also filed one or more complaints with the Office of the Comptroller of Currency, alleging that Plaintiff had discriminated against Defendants on the basis of race in violation of the ECOA. Defs.' Answer at 28; see generally ECF No. 12, Ex. C.
This matter began in D.C. Superior Court, where Plaintiffs asserted that Defendants had wrongfully kept some of the rent paid by their tenants, and sought money damages and the appointment of a receiver. See generally Compl., ECF No. 1-1, Ex. A. Defendants removed the case to this Court. Errata to Notice of Removal, ECF No. 4.
Defendants answered Plaintiff's complaint and asserted multiple affirmative defenses and the nine-count counterclaim at issue here. See generally Defs.' Answer. The nine counts of the counterclaim argue,
The Court now addresses Plaintiff's motion to dismiss Counts I, II, III, V, VI, VII, and IX of Defendants' counterclaim. Pl.'s Mot. Dismiss Counts I, II, III, V, VI, VII, & IX
When evaluating a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, a court construes the complaint in the light most favorable to the non-movant and accepts as true all reasonable factual inferences that can be drawn from well-pleaded factual allegations. In re United Mine Workers of Am. Employee Benefit Plans Litig., 854 F.Supp. 914, 915 (D.D.C. 1994). The same standards are applicable when a plaintiff moves to dismiss a defendants' counterclaims. Wharf, Inc. v. District of Columbia, 232 F.Supp.3d 9, 15-16 (D.D.C. 2017). In deciding a Rule 12(b)(6) motion, a court may consider "the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint." Ward v. D.C. Dep't of Youth Rehab. Servs., 768 F.Supp.2d 117, 119 (D.D.C. 2011) (citations omitted).
"A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) `tests the legal sufficiency of a complaint,' or in this case, a counterclaim. The motion does not test a plaintiff's ultimate likelihood of success on the merits, but only forces the court to determine whether a plaintiff has properly stated a claim." Boland v. Wasco, Inc., 50 F.Supp.3d 1, 4-5 (D.D.C. 2014) (quoting Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002) and citing ACLU Found. of S. Cal. v. Barr, 952 F.2d 457, 467 (D.C. Cir. 1991)). In order to survive such a motion, the counterclaim must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 557, 127 S.Ct. 1955). "The court need not accept as true inferences unsupported by facts set out in the complaint or legal conclusions cast as factual allegations." Boland, 50 F.Supp.3d at 5 (citing Warren v. District of Columbia, 353 F.3d 36, 39-40 (D.C. Cir. 2004)). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955).
Plaintiff moves to dismiss Counts I, II, III, V, VI, and IX of Defendants' counterclaim. The Court addresses each in turn.
Count I of Defendants' counterclaim raises three claims under the Equal Credit Opportunity Act (ECOA): race-based discrimination, income-based discrimination, and retaliation. Pl.'s Partial MTD at 3, ECF No. 17-1. Under the ECOA,
As a threshold matter, the Court addresses Plaintiff's argument that a discrimination claim under the ECOA requires the applicant to demonstrate an "adverse action." Subsection (d) of 15 U.S.C. § 1691 entitles an applicant to "a statement of reasons" from a creditor for any "adverse action" taken against the applicant, and provides a definition of an adverse action. Id. § 1691(d). Plaintiff asserts that the actions the Defendants complain of here, such as allegedly unfavorable terms in the Forbearance Agreement, are excluded from being adverse actions because the statutory definition does not include "a refusal to extend additional credit under an existing credit arrangement where the applicant is delinquent or otherwise in default, or where such additional credit would exceed a previously established credit limit." Id. § 1691(d)(6); see also Pl.'s Partial MTD at 10 ("The Defendants' failure to allege that they were not in default of their loans is actually fatal to each of their ECOA claims. To prevail on any of their ECOA claims, the Defendants must show they suffered an adverse action.").
However, this Court doubts that the statutory definition of an adverse action must be met for an ECOA discrimination claim. Although some out-of-circuit courts have adopted the interpretation of the statute endorsed by Plaintiff,
Plaintiff claims that Defendants fail to state a claim because "Defendants' discrimination claims are supported by nothing more than naked conclusory leaps; not any actual facts." Pl.'s Partial MTD at 3. The Court agrees that Defendants have insufficiently pled their claims of race-based and income-based discrimination.
Defendants describe their claim for race-based discrimination in only the most threadbare and conclusory fashion. See, e.g., Defs.' Answer at 32 ("Based on information and belief, Presidential Bank treated Borrowers [sic] minority owned LLCs (African American) and the Guarantor (African American) different [sic] than they treated their white commercial credit applicants."); Defs.' Answer at 32 ("Based on information and belief, Presidential Bank as a creditor acted with specific intent to discriminate against Borrowers .... Presidential Bank's racially discriminatory activities occurred before, during, and after the extension of credit and extension of forbearance agreements .... Based upon information and belief, Presidential's `disparate treatment' can be found through comparing the treatment of Borrowers as applicants who receive different treatment than non-minority borrowers for no discernable reason other than a prohibited basis such as race or color."); Defs.' Answer at 33 ("Borrowers [sic] African American race and association with low-income African American tenants ... was a substantial motivating reason for Presidential's decision to refused [sic] to offer Borrowers unfair credit and unconscionable forbearance terms ....").
These claims are precisely the "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements" that the Supreme Court has held are insufficient to state a claim. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955). Defendants present no facts from which they could conclude that race was a factor in Plaintiff's treatment of them. See also BEG Investments, LLC v. Alberti, 34 F.Supp.3d 68, 85 (D.D.C. 2014) ("[G]eneralized
Of course, obtaining direct evidence of discrimination, especially prior to discovery, may be difficult. The Supreme Court has considered analogous concerns. For example, Twombly dealt with antitrust, where it can be difficult to establish whether conduct is the result of an agreement or independent action. The Supreme Court required the plaintiff to "place[ the complaint] in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action." Twombly, 550 U.S. at 557, 127 S.Ct. 1955. Other courts have since concluded that this requirement may be met by, for example, "provid[ing] some circumstantial facts, including historical supply and consumption levels, market prices, profit levels, and the use the industry reports, to support an inference that the defendants engaged in not merely parallel conduct." City of Moundridge v. Exxon Mobil Corp., 250 F.R.D. 1, 5 (D.D.C. 2008). As the Supreme Court noted in Iqbal, a case in which the plaintiff had attempted to sufficiently plead purposeful and unlawful discrimination, "Rule 8 marks a notable and generous departure from the hypertechnical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Iqbal, 556 U.S. at 678-79, 129 S.Ct. 1937. Here, analogously, the counterclaim is devoid of any circumstantial facts, history, or context which would support an inference that Plaintiff acted for discriminatory reasons.
Similarly, Defendants' allegations of income-based discrimination likewise fail to state a claim. See, e.g., Defs.' Answer at 34 ("Presidential allowed the condition of the collateral properties to deteriorate because of Presidential's callous disregard for the
The Court rejects out of hand Defendants' implications that Plaintiff seeks to force them to establish a prima facie case at the motion to dismiss stage.
Unlike their claims of race-based and income-based discrimination, Defendants have sufficiently pled their allegations that they were retaliated against. Plaintiff again argues that Defendants' counterclaim fails because Defendants have not alleged an adverse action under the statutory definition. Pl.'s Partial MTD at 9-10. However, for the reasons set forth above, it is not clear to the Court that it is the statutory definition of an adverse action that would trigger the notification requirement that is relevant for determining whether a party has pled a claim for retaliation. Thus, absent further briefing on the issue, the Court does not dismiss the portion of Count I of Defendants' counterclaim that alleges retaliatory discrimination based on Defendants' complaints.
Count II of Defendants' counterclaim asserts claims under the Fair Debt Collection Practices Act (FDCPA). Defs.' Answer at 35. Plaintiff argues that Count II should be dismissed because Plaintiff is not a debt collector. Pl.'s Partial MTD at 11. Defendants have stipulated their agreement that this count be dismissed. See
Count III of Defendants' counterclaim asserts that Plaintiff engaged in fraudulent misrepresentation by "knowingly misstat[ing] material facts and knowingly conceal[ing] material facts, which it has a duty to disclose and upon which the borrower has relied." Defs.' Answer at 36. Plaintiff argues that Count III should be dismissed because it stems from the same factual basis as the alleged breach of the Forbearance Agreement described in Count IV. Pl.'s Partial MTD at 11-12; see also Pl.'s Partial MTD at 12 ("It is well established in the District of Columbia that a litigant may not take what is plainly a breach of contract claim and morph it into a tort claim for fraud.").
Defendants do not contest Plaintiff's legal argument, but assert in their opposition that "Plaintiff's fraud began before the forbearance agreement was signed; there was fraud in the inducement in addition to the fraud predicated upon contractual duties." Defs.' Opp'n at 10. According to Defendants, "Plaintiff in its capacity as banker induced Defendants to enter into the Forbearance Agreement with fraudulent and false misrepresentations that it would not foreclose upon Defendants' properties and that it would manage said properties in the proper manner thereby preserving the value of Defendants' assets." Defs.' Opp'n at 11.
However, Count III of Defendants' counterclaim — unlike Defendants' opposition — does not allege fraud in the inducement, or refer to any allegedly fraudulent conduct at all prior to the signing of the Forbearance Agreement. See, e.g., Defs.' Answer at 36 ("Presidential Bank negligently represented facts to Borrows and the court when Presidential represented that Borrowers defaulted on their mortgages."); Defs.' Answer at 36 ("As the receiver of Borrowers' rental income Presidential Bank failed to provide Borrowers any accounting or accountability."); Defs.' Answer at 37 ("Presidential Bank did not permit Borrowers to withdraw funds to pay budgeted project expenses or to provide for debt service payments ...."); Defs.' Answer at 36-37 ("Presidential Bank ... intentionally failed to pay Borrowers' mortgages ...."); see also Pl.'s Opp'n Leave File, ECF No. 30 at 6 ("Defendants fail to cite any paragraph in their Counterclaim where they allegedly make any such allegations [about fraud in the inducement]. That is because the Counterclaim states nothing of the sort."). Defendants have neither sought nor received leave to amend their counterclaim, and may not expand its scope through their opposition. See, e.g., Haynes v. Navy Fed. Credit Union, 52 F.Supp.3d 1, 8 (D.D.C. 2014) ("[A] party may not amend its complaint or broaden its claims through summary judgment briefing." (collecting citations)). Therefore, the Court will dismiss Count III of Defendants' counterclaim, and if Defendants wish to assert fraudulent inducement they must move for leave to amend their counterclaim.
Count V of Defendants' counterclaim asserted that Plaintiff had a conflict of interest when it both was the lender and decided how to make payments on the loans, and that Plaintiff assumed a "fiduciary duty" toward Defendants that it breached by not acting in good faith with is handling of rental income and the rental properties. Defs.' Answer at 40-42. Count VI claims that "Presidential created an agency relationship"
Plaintiff argues that Counts V, VI, VII, and IX of Defendants' counterclaim are "a breach of contract claim with other names" and should therefore be dismissed as duplicative of Defendants' actual breach of contract claim (which is contained Count IV). Pl.'s Partial MTD at 12-14. "As a matter of judicial economy, courts should dismiss claims that are duplicative of other claims." Wultz v. Islamic Republic of Iran, 755 F.Supp.2d 1, 81-82 (D.D.C. 2010) (citing McGee v. District of Columbia, 646 F.Supp.2d 115, 121-22 (D.D.C. 2009) and Park v. Hyatt Corp., 436 F.Supp.2d 60, 66 (D.D.C. 2006)). "Duplicative claims are those that stem from identical allegations, that are decided under identical legal standards, and for which identical relief is available." Wultz, 755 F.Supp.2d at 82 (citing McGee, 646 F.Supp.2d at 121-22).
Count IV of the counterclaim alleges that Plaintiff committed breach of contract by, inter alia, "fail[ing] to disburse lockbox account funds to timely pay Borrowers' mortgages," which violated the Forbearance Agreement and caused Borrowers to default. Defs.' Answer at 38. Defendants also argue that Plaintiff "allowed Borrowers' insurance to lapse," "withheld or delayed payment of `Approved Expenses' requested by Borrowers [and] necessary for the preservation of the properties," and "failed to apply payments to the principal balance of the Notes." Defs.' Answer at 39. In short, Defendants argue that Plaintiff breached the Forbearance Agreement by mis-allocating Defendants' payments, causing Defendants a bevy of harms, including default, deteriorating conditions in the properties, and lapsed insurance.
Defendants do not defend Counts V, VI, or VII of their counterclaim from Plaintiff's assertion that they are duplicative of Count IV. Because Defendants do not respond to Plaintiff's arguments concerning these counts, Defendants have waived any objection, and dismissal is therefore appropriate. The Court further notes, that, in its independent judgment, Counts V, VI, and VII are duplicative of the breach of contract claim contained in Count IV of Defendants' counterclaim.
Furthermore, Defendants argue only that the claim that Plaintiff misused government funds is unique. See Defs.' Opp'n at 11-12. This phrase appears in precisely two locations in the counterclaim — in the heading for Count IX, which reads "Breach of Fiduciary Duty, Embezzlement Mismanagement of Government Funds" and in paragraph 113, which states "As a direct and proximate result of Presidential's actions, Borrowers have suffered significant harm and the government may have been defrauded out of hundreds of thousands of dollars." Defs.' Answer at 46 (emphasis added). This oblique reference would be subject to dismissal for failing to meet the pleading standards of Rule 8 even if it were not duplicative. Cf. Eastland v. Bush, No. 91-2769, 1991 WL 262154, at *1 (D.D.C. Nov. 26, 1991) ("Rule 8 requires that the complaint contain a `short and plain statement' of the plaintiff's claims. This statement need not use formal legal language; however, it must be clear and understandable. The purpose of this requirement is to give the defendant clear notice of what plaintiff is seeking so that the defendant may adequately defend himself or herself.").
For the foregoing reasons, Plaintiff's Motion to Partially Dismiss Defendants' Counterclaim (ECF No. 17) is
However, the forum-defendant rule is not jurisdictional, and thus may be waived. Klayman v. Judicial Watch, Inc., 185 F.Supp.3d 67, 71 (D.D.C. 2016) ("The [c]ourt first considers whether the forum defendant rule is a jurisdictional rule. While the D.C. Circuit Court of Appeals has not yet resolved this issue, other district judges in this District have concluded that this rule is not jurisdictional. See, e.g., Sae Young Kim v. Nat'l Certification Comm'n for Acupuncture & Oriental Med., 888 F.Supp.2d 78, 82 (D.D.C. 2012); Taghioskoui v. George Washington Univ., No. 12-1740, 2013 WL 2371248, at *1 (D.D.C. May 28, 2013). Similarly, numerous other Circuit Courts have come to the same conclusion. See Lively v. Wild Oats Markets, Inc., 456 F.3d 933, 940 (9th Cir. 2006)." (parentheticals omitted)). Plaintiff asserted the forum-defendant rule against removal in its motion to remand. Pl.'s Mot. Remand, ECF No. 3. However, Plaintiff later withdrew the motion to remand. See Line Withdrawing Mot. Remand, ECF No. 22 ("In light of the volume of pleadings that have been filed to date, together with this Court's overall familiarity with the case, Presidential Bank believes that judicial efficiency is better served by remaining in this Court and, accordingly, elects to waive any defects in the Defendants' removal to this Court."). Plaintiff has thus waived any available objections under the forum-defendant rule, and the Court does not consider them.
The Court's jurisdiction in this matter arises from diversity jurisdiction. Amended Notice Removal ¶ 5, ECF No. 4-2 ("This Court has... original diversity jurisdiction of this action under 28 U.S.C. § 1332 because of the complete diversity of citizenship among the parties and because the amount in controversy exceeds $75,000."). Diversity jurisdiction requires that the dispute be "between ... citizens of different States." Simon v. Mitchell, 199 F.Supp.3d 244, 246 n.5 (D.D.C. 2016) (quoting 28 U.S.C. § 1332(a)(1)). It is undisputed that Plaintiff is a citizen of Maryland. Compl. ¶ 1, ECF No. 1-1 ("Presidential is a federal savings bank incorporated under the laws of the State of Maryland with its principal place of business in Bethesda, Maryland."); Amended Notice Removal ¶ 2 (Upon information and belief, Plaintiff Presidential Bank, FSB is incorporated in Maryland as a Maryland corporation and maintains the Plaintiff Bank's headquarters, principle [sic] place of business and nerve center in Maryland. Therefore Plaintiff is a citizen of Maryland."). Even if Defendants are therefore Virginia citizens rather than citizens of D.C., jurisdiction exists.
Defs.' Answer at 29-47.
Here, the Court will permit Defendants to late-file their opposition. Plaintiff does not argue that it would be prejudiced by consideration of Defendants' opposition. ECF No. 30 at 1-2. Any delay will be negligible because the Court is now ready to turn to Plaintiff's motion to dismiss, and now has Defendants' opposition before it. Nor does Plaintiff identify any concrete reason to fear delay. Although Defendants admit that their failure to timely file their opposition was inadvertent, there is no evidence of bad faith. Considering the legal arguments from both sides will assist the Court, especially because the Court is hesitant to grant a motion to dismiss as conceded. Cohen v. Bd. of Trustees of the Univ. of the D.C., 819 F.3d 476, 482 (D.C. Cir. 2016) (counseling against granting a motion to dismiss as conceded because it "risks circumventing the clear preference of the Federal Rules to resolve disputes on their merits"). The Court therefore grants Defendants leave to late file their opposition. Cf. Cohen, 819 F.3d at 479 (stating that the four factors to be considered in analyzing a Rule 6(b) motion are "(1) the risk of prejudice to the other side; (2) the length of the delay and the potential impact on judicial proceedings; (3) the reason for the delay and whether it was within counsel's reasonable control; and (4) whether counsel acted in good faith." (citations omitted)).
