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Huntington National Bank v. Hard Rock Exploration, Inc.

United States District Court, N.D. West Virginia

May 16, 2017

THE HUNTINGTON NATIONAL BANK, Plaintiff,
v.
HARD ROCK EXPLORATION, INC., CARALINE ENERGY COMPANY, BLUE JACKET GATHERING, LLC, BLUE JACKET PARTNERSHIP, BROTHERS REALTY, LLC, DUANE YOST, JAMES L. STEPHENS, JR., GREGORY LAUGHLIN and MONICA R. FRANCISCO, Defendants.

          MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF'S MOTION TO DISMISS COUNTER CLAIMS

          FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE

         I. Background

         Defendants Hard Rock Exploration, Inc., Caraline Energy Company, Blue Jacket Gathering, LLC, Blue Jacket Partnership, and Brothers Realty (collectively, “Hard Rock Entities”) are business entities affiliated with defendant Hard Rock Exploration, Inc., which engages in oil and gas development. Defendants James Stephens, Jr., Monica Francisco, Duane Yost, and Gregory Laughlin (collectively, “principals”) are shareholders of defendant Hard Rock Exploration, Inc. The Hard Rock Entities borrowed money from the plaintiff, The Huntington National Bank, so as to pursue oil and gas operations. Several years into the lending relationship, however, the plaintiff claims that the defendants failed to satisfy their obligations. The plaintiff filed this action for breach of contract.

         The plaintiff's complaint alleges that the following amounts remain outstanding: (1) a $500, 000.00 loan (referred to as “Obligation 174”); (2) a $17, 887, 867.00 loan (“Obligation 158”); (3) a $6, 250, 000.00 loan (“Obligation 42”); (4) a $5, 000, 000.00 loan (“Obligation 59”); and (5) an unspecified credit card obligation (“credit card obligation”), which is allegedly worth $19, 148.10. In addition, the plaintiff alleges that the parties engaged in a series of swap transactions and a Forbearance Agreement, which contain the following obligations: (1) termination charges for the swaps totaling $839, 606.02; and (2) a $30, 000.00 forbearance fee. The plaintiff seeks a judgment for the balance due under the obligations listed above, including legal fees.

         The defendants filed their answer and counterclaim. ECF No. 37. The counterclaim asserts claims for fraud and deceit (Count I), interference with prospective business advantage (Count II), breach of implied covenant of good faith and fair dealing (Count III), breach of contract (Count IV), economic duress (Count V), breach of fiduciary duty (Count VI), demand for injunctive relief (Count VII), demand for declaratory judgment (Count VIII), and demand for an accounting (Count IX).

         The plaintiff then filed a motion to dismiss the defendants' counterclaims. ECF Nos. 40 and 41. The plaintiff argues that the defendants' counterclaims are barred by the Forbearance Agreement, which the plaintiff alleges releases the plaintiff from all claims arising out of its lending relationship with the defendants. The plaintiff also argues that the defendants have failed to sufficiently allege their causes of action for each count of the counterclaim.

         The defendants filed a response to the plaintiff's motion to dismiss the defendants' counterclaims. ECF No. 46. The defendants allege that the Forbearance Agreement is unenforceable and does not preclude the claims in the defendants' counterclaim. The defendants further assert that the counterclaim contains allegations that, taken as true and construed in the light most favorable to them, adequately support the claims stated therein.

         The plaintiff did not file a reply to the defendants' response to the plaintiff's motion to dismiss the counterclaims.

         II. Applicable Law

         In assessing a motion to dismiss for failure to state a claim under Rule 12(b)(6), a court must accept all well-pled facts contained in the complaint as true. Nemet Chevrolet, Ltd v. Consumeraffairs.com, Inc, 591 F.3d 250, 255 (4th Cir. 2009). However, “legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement fail to constitute well-pled facts for Rule 12(b)(6) purposes.” Id. (citing Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)). This Court also declines to consider “unwarranted inferences, unreasonable conclusions, or arguments.” Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n.26 (4th Cir. 2009).

         It has often been said that the purpose of a motion under Rule 12(b)(6) is to test the formal sufficiency of the statement of the claim for relief; it is not a procedure for resolving a contest about the facts or the merits of the case. 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356 (3d ed. 1998). The Rule 12(b)(6) motion also must be distinguished from a motion for summary judgment under Federal Rule of Civil Procedure 56, which goes to the merits of the claim and is designed to test whether there is a genuine issue of material fact. Id. For purposes of the motion to dismiss, the complaint is construed in the light most favorable to the party making the claim and essentially the court's inquiry is directed to whether the allegations constitute a statement of a claim under Federal Rule of Civil Procedure 8(a). Id. § 1357.

         A complaint should be dismissed “if it does not allege ‘enough facts to state a claim to relief that is plausible on is face.'” Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Facial plausibility is established once the factual content of a complaint ‘allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Nemet Chevrolet, 591 F.3d at 256 (quoting Iqbal, 129 S.Ct. at 1949). Detailed factual allegations are not required, but the facts alleged must be sufficient “to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555.

         III. Discussion

         This Court has construed the counterclaims in the light most favorable to the defendants for the purposes of this motion to dismiss. Although the plaintiff argues that the Forbearance Agreement is enforceable and precludes all of the defendants' claims, the defendants have made factual allegations that could result in the Forbearance Agreement being judged void and unenforceable. West Virginia law states that “[w]here [a] plaintiff is forced into a transaction as a result of unlawful threats or wrongful, oppressive, or unconscionable conduct on the part of the defendant which leaves the plaintiff with no reasonable alternative but to acquiesce, the plaintiff may void the transaction and recover any economic loss.” Berardi v. Meadowbrook Mall Co., 572 S.E.2d 900, 905 ( W.Va. 2002) (citing Machinery Hauling, Inc. v. Steel of W.Va., 384 S.E.2d 139, 140 ( W.Va. 1989)). The counterclaim alleges (1) fraudulent, wrongful, and oppressive conduct by the ...


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