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Nidy v. U.S. Bancorp Government Leasing and Finance, Inc.

United States District Court, S.D. West Virginia

June 19, 2019

DIANNA NIDY, individually and on behalf of others similarly situated, Plaintiff,
U.S. BANCORP GOVERNMENT LEASING AND FINANCE, INC., as Trustee for the benefit of the holders of COMM 2013-CCRE12 Mortgagee Trust Commercial Mortgage Pass-Through Certificates; and WELLS FARGO COMMERCIAL MORTGAGE SERVICING, Defendants.


          John T. Copenhaver, Jr. Senior United States District Judge

         Pending is the motion to dismiss filed on August 31, 2018 by defendants U.S. Bancorp Government Leasing and Finance, Inc. (“U.S. Bank”) and Wells Fargo Commercial Mortgage Servicing (“Wells Fargo”).[1] Also pending is the plaintiff's motion to refer this civil action to the United States Bankruptcy Court for the Southern District of West Virginia, filed September 7, 2018, [2] for ultimate transfer to the United States Bankruptcy Court for the Northern District of West Virginia where there is pending the bankruptcy case of Tara Retail Group, LLC.

         I. Background

         “On or about September 17, 2013, UBS Real Estate Securities, Inc. (‘Original Lender') lent $13, 650, 000.00 (the ‘Loan') to Tara Retail Group, LLC.” Compl. ECF No. 1, ¶ 5. As evidence of the Loan, Tara Retail Group executed a promissory note (the “Note”) and Loan Agreement (the “Loan Agreement”) on that same date for the same amount in favor of the Original Lender. Id. “As security for the repayment of the Loan, ” the borrower executed a Deed of Trust and Security Agreement (“Deed of Trust”) to a trustee for the benefit of the Original Lender. Id. ¶ 6. Under the Deed of Trust, the borrower “conveyed certain real estate and personal property, . . . known as the Crossings Mall located at 223 Crossings Mall Road, Elkview, West Virginia 25071 for the benefit of Original Lender.” Id. Also on September 17, 2013, Tara Retail Group executed an Assignment of Leases and Rents (“ALR”) in favor of the Original Lender. Id. ¶ 8. The ALR granted to borrower a “revocable license to collect, receive, use and enjoy the Rents, as well as other sums due under the Lease Guarantees, ” but that license is automatically revoked upon the occurrence of an “Event of Default.” ALR, ECF No. 8-3, at §§ 2.1, 3.1.

         At some unspecified later time, the Original Lender assigned the Note, the Deed of Trust, and the ALR to defendant U.S. Bank “as Trustee for the Benefit of the Holders of Comm 2013-CCRE12 Mortgagee Trust Commercial Mortgage Pass-Through Certificates.” Compl., ECF No. 1, ¶ 9.

         It is alleged that defendant Wells Fargo “is holder of certain escrow accounts, including the maintenance and repair account held for the protection of the secured property, ‘Elk Crossings Mall.'” Id. ¶ 3. The secured property is leased by Tara Retail Group, LLC, to approximately twenty-one tenants such as “Kmart, Kroger and McDonald's.” Id. ¶ 7. Wells Fargo is named as Master Servicer in the Pooling and Servicing Agreement. Id. ¶ 17.

         The plaintiff notes that the Pooling and Servicing Agreement states that Wells Fargo “shall use reasonable efforts consistent with the Servicing Standard to . . . advance the amount of any shortfall as a Property Advance unless the Master Servicer determines in accordance with the Servicing Standard that such Advance would be a Nonrecoverable Advance . . . .” Id. The Standard of Care in the Pooling and Servicing Agreement also states that Wells Fargo should act to “diligently service and administer the Loans in the best interests of [and] for the benefit of all Certificate Holders.” Id.

         The court notes that the Pooling and Servicing Agreement is one between and for the benefit of those on the lender side of the transaction described above and consists of the following entities: Deutsche Mortgage and Asset Receiving Corporation (the “Depositor”), Wells Fargo (the “Master Servicer” and the “Certificate Administrator, Paying Agent and Custodian”), U.S. Bank (the “Trustee”), LNR Partners, LLC (the “Special Servicer”), and Park Bridge Lender Services LLC (the “Operating Advisor”). ECF No. 8-4, at 1.

         The plaintiff further alleges that there was a covenant under the “lease agreement” between the debtor and one of its tenants and “the Standard of Care in the Pooling and Servicing Agreement” to maintain and preserve the property and an “agreement to maintain the property so as to ensure that the debt under the loan agreement would be maintained.” Compl., ECF No. 1, ¶ 26. Plaintiff also claims that “[u]nder the terms of the leases, the common areas were to be maintained for the benefit of customers, employees, licensees and invitees of the tenants.” Id. The plaintiff attempts to conflate the agreements between the debtor and the lender with those between the debtor and its tenants, despite those agreements having different purposes and parties.

         The Lease Agreement referenced by the plaintiff in her complaint is between Tara Retail Group (Landlord) and Anytime Fitness (Tenant) and states that the landlord “covenant[s] that Tenant on paying the rent and performing the conditions and covenants herein contained, shall and may peaceably and quietly have, hold and enjoy the Premises.” Id. ¶ 14. The Lease Agreement also prescribes that the “Landlord shall keep the structural portions of the premises and the Shopping Center, as applicable, in reasonable repair.” Id.

         “On or about January 16, 2016, the Defendant Wells Fargo, as agent and holder of the maintenance escrow account, was contacted by Gold Coast Partners LLC, [3] requesting the expenditure of twenty four thousand dollars, for the repair of the culvert over which the only entrance to the shopping center passed, and the repair of the ‘dirt cliff' behind K Mart.” Id. ¶ 11. This request stated:

If these issues are not resolved immediately the only entrance to the center could collapse and dirt could continue falling behind Kmart both scenarios could expose us, the Landlord, to personal and injury liability cases.

Id. Wells Fargo did not authorize the repairs as requested, and no other defendant independently offered to pay for the repairs. Id. ¶ 12. The plaintiff asserts that the tenants were required to pay into that maintenance escrow account. See Id. ¶ 30.

         On June 23, 2016, the Elk Crossings Mall and the surrounding area was flooded. Id. ¶ 19. “The only point of access to the Crossings Mall shopping center was asphalt covered, dirt and gravel fill over a culvert. During the flood . . . the culvert, fill and paving were washed away.” Id. ¶ 20. “The culvert was replaced with a bridge and the tenants began restoration of their businesses and equipment in August, 2017.” Id. ¶ 21.

         The plaintiff and class representative, Dianna Nidy, was employed by Kmart Corporation, a tenant of the Crossings Mall shopping center. Id. ¶ 1. She lost her employment when the center closed as a result of the loss of access. Id. Ms. Nidy represents the proposed class of plaintiffs who consist of “employees of tenants who suffered loss of income and benefits as a result of flooding caused or contributed to by the Defendants.” Id. at 15, ¶ 26-27.

         The plaintiff initiated this action in this court on June 21, 2018. In her complaint, plaintiff asserts four causes of action against both defendants: (1) “Breach of Duty Under Loan Documents Including the Servicing Standard”; (2) “Breach of Fiduciary Duty Under the Power of Attorney Provision of the Assignments of Leases and Rents and the Structure of the Financing Transaction”; (3) “Tortious Interference with a Business Relationship”; and (4) “Breach of General Duty of Care.” A fifth claim is simply a request for punitive damages. Id. at 11-15. Each of these causes of action is based on plaintiff's belief that defendants breached a duty by failing to distribute money, out of a maintenance fund into which the tenants of Elk Crossings Mall were obligated to contribute, which led to the closing of the businesses on the premises, thereby harming the plaintiff and those similarly situated to her.

         The defendants have moved to dismiss each of plaintiff's claims on the grounds that she has failed to state a claim upon which relief might be granted. Before responding to defendants' motion, the plaintiff moved to refer this civil action to the United States Bankruptcy Court. Both motions have been fully briefed.

         II. Jurisdiction

         The plaintiff neglected to include in her complaint the basis for federal jurisdiction in this case. However, there are sufficient facts available for the court to assert jurisdiction over this matter pursuant to 28 U.S.C. § 1332. First, it appears that Ms. Nidy is a West Virginia resident inasmuch as it is claimed she worked in Kanawha County, West Virginia at the time of the incident. Next, the plaintiff states that U.S. Bank's legal address is in Ohio, see Compl., ECF No. 1, ¶ 4, and Wells Fargo does not assert that it is principally located or was incorporated in West Virginia. For these reasons, it appears as though there is complete diversity between the parties.

         Regarding the amount in controversy, the plaintiff asserts that she lost income and benefits from her employment while the businesses at Elk Crossings Mall were closed from June 2016 until August 2017. See Id. ¶¶ 19, 21, 47. She also asserts a claim for punitive damages against the defendants. Id. ¶ 45. Accordingly, it is apparent that the amount in controversy exceeds $75, 000. For these reasons, the court will rule on the defendants' motion to dismiss inasmuch as it has jurisdiction over this civil action pursuant to 28 U.S.C. § 1332.

         III. Legal Standard

         Federal Rule of Civil Procedure 8(a)(2) requires that a pleader provide “a short and plain statement of the claim showing . . . entitle[ment] to relief.” Fed.R.Civ.P. 8(a)(2); Erickson v. Pardus, 127 S.Ct. 2197, 2200 (2007). Rule 12(b)(6) correspondingly permits a defendant to challenge a complaint when it “fail[s] to state a claim upon which relief can be granted . . . .” Fed.R.Civ.P. 12(b)(6).

         The required “short and plain statement” must provide “‘fair notice of what the . . . claim is and the grounds upon which it rests.'” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957), overruled on other grounds, Twombly, 550 U.S. at 563); see also Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007). In order to survive a motion to dismiss, “a complaint 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 (2009) (quoting Twombly, 550 U.S. at 570); see also Monroe v. City of Charlottesville, 579 F.3d 380, 386 (4th Cir. 2009).

         Application of the Rule 12(b)(6) standard requires that the court “‘accept as true all of the factual allegations contained in the complaint. . . .'” Erickson, 551 U.S. at 94 (quoting Twombly, 550 U.S. at 555-56); see also S.C. Dept. of Health and Envt'l Control v. Commerce and Indus. Ins. Co., 372 F.3d 245, 255 (4th Cir. 2004) (quoting Franks v. Ross, 313 F.3d 184, 192 (4th Cir. 2002)).

         “A motion to dismiss tests the sufficiency of a complaint, ” Occupy Columbia v. Haley, 738 F.3d 107, 116 (4th Cir. 2013), “and [the court's] evaluation is thus generally limited to a review of the allegations of the complaint itself. However, [the court] also consider[s] documents that are explicitly incorporated into the complaint by reference . . . .” Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th Cir. 2016) (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).

         IV. Discussion

         A. “Breach of Duty Under Loan Documents Including the Servicing Standard”

         While not clear from the complaint what cause of action is being asserted here, the plaintiff, in her response to the defendants' motion to dismiss, acknowledges that this first count is “a claim ...

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