United States District Court, D. Maryland
WAYNE B. KNIGHT, et al Plaintiffs
MANUFACTURERS & TRADERS TRUST CO., Defendant
For Wayne B. Knight, 2021 Love Point, LLC, Milford Properties, LLC, Plaintiffs: James R Schraf, James A. Vidmar , LEAD ATTORNEYS, Yumkas, Vidmar & Sweeney, LLC, Columbia, MD.
For Manufacturers and Traders Trust Company, Defendant: Carl Alban Howard, Lawrence J Gebhardt, LEAD ATTORNEY, Gebhardt and Smith LLP, Baltimore, MD.
James K. Bredar, United States District Judge.
Wayne B. Knight (" Knight" ) and 2021 Love Point, LLC (" Love Point" ) brought this suit against Manufacturers and Traders Trust Company (" Defendant" ) alleging breach of contract, negligent misrepresentation, and breach of a fiduciary duty, and seeking declaratory and injunctive relief. Knight and Love Point later amended their complaint to add a new Plaintiff, Milford Properties, LLC (" Milford," and collectively with Knight and Love Point, " Plaintiffs" ). (ECF No. 17.) Now pending before the Court is Plaintiffs' motion to stay (ECF No. 38), Defendant's motion to dismiss (ECF No. 28), Defendant's motion to strike Plaintiffs' jury demand (ECF No. 26), and Plaintiffs' motion to seal (ECF No. 18). For the purposes of these matters, the parties have stipulated that " Maryland law shall govern." (ECF No. 37.) The issues have been briefed, and no hearing is required, Local Rule 105.6. For the reasons explained below, Plaintiffs' motion to stay will be DENIED, Defendant's motion to dismiss will be GRANTED, Defendant's motion to strike Plaintiffs' jury demand will be DENIED AS MOOT, and Plaintiffs' motion to seal will be DENIED.
This lawsuit, at its core, is a dispute over who should bear the costs and losses associated with two loans in default. In 2005, a now-defunct financial organization named K Bank extended a series of loans to Plaintiffs for the purchase of a property in Delaware (the " Mispillion Property" ). (ECF No. 17 ¶ ¶ 12-15.) At the time, the Mispillion Property had an " as is" value of $13.5 million. ( Id. ¶ 14.) The Mispillion Property served as collateral to secure K Bank's loans, and Plaintiffs' other properties in Florida and Maryland served as additional collateral. ( Id. ¶ 16.)
Along with the rest of the banking industry, K Bank faced financial hardship in 2007. The Federal Deposit Insurance Corporation (" FDIC" ) and the Maryland Division of Financial Regulation began to investigate, and found that K Bank was at risk of under-capitalization. ( Id. ¶ ¶ 27-34.) In 2010, and impliedly in response to the FDIC's investigation, K Bank reappraised the Mispillion Property and found that the property had lost approximately $10 million in value over three years. ( Id. ¶ ¶ 35-38.)
Plaintiffs and K Bank met soon thereafter to discuss " alternative uses for the Mispillion Property," with the mutually-shared hope that re-engineering could revive the property's value. ( Id. ¶ ¶ 40-42.) In a separate meeting, Plaintiffs and K Bank negotiated modifications to the loan agreements. ( Id. ¶ ¶ 45-47.) These discussions culminated in a March 2010 letter (the " Letter Agreement" ) that required Knight to post additional collateral. ( Id. ¶ 50.) In return, K Bank reduced Knight's principal owed by $1 million, among other modifications to the loan agreements. ( Id. ¶ 52.) K Bank also agreed to the following terms and conditions, which serve as the basis for this lawsuit: " It is [in] our mutual interest to have the [Mispillion] property engineered to obtain the highest and best use as soon as possible, and the Bank agrees to pay for a market feasibility study. Additionally, the bank will pay fifty percent of the reasonable costs for the engineering." (ECF No. 32-1 at 2.)
Plaintiffs allege that " [d]uring negotiations leading up to the [Letter Agreement], K Bank specifically agreed that it would take the necessary steps to move forward with the market feasibility study and the re-engineering of the Mispillion Property in addition to paying for it." (ECF No. 17 ¶ 54.) Crucially, Plaintiffs do not allege that this obligation was reduced to writing. At present, the Mispillion Property has not been subject to a market feasibility study or re-engineering. ( Id. ¶ ¶ 82, 94.)
K Bank's financial condition continued to suffer, and in November 2010 it was placed into receivership by the FDIC. ( Id. ¶ 68.) K Bank's assets--including the two outstanding loans at issue--were purchased by Defendant soon thereafter. ( Id. ¶ 69.) Defendant did not respond to Plaintiffs' queries about the status of a feasibility study ( Id. ¶ ¶ 80-83), and eventually Defendant's counsel notified Plaintiffs that the two loans were in default ( Id. ¶ 90).
Knight and Love Point originally filed this lawsuit in the Circuit Court for Baltimore County, on May 7, 2014. (ECF No. 41-1 at 6.) Three weeks later, Defendant removed the action to this Court. (ECF No. 1.) On July 14, 2014, Plaintiffs filed an amended complaint, modifying their arguments and adding Milford as a third plaintiff. (ECF No. 17.) Plaintiffs now seek to stay this federal action while a related suit proceeds in the Circuit Court for Queen Anne's County (the " Queen Anne's case" ).
In the time between Plaintiffs' original complaint in the Circuit Court for Baltimore County and Defendant's notice of removal in this Court, Defendant was responsible for a flurry of court filings, all related to the same outstanding loans. Defendant filed a confessed judgment action against Knight and Love Point in the Queen Anne's case (ECF No. 41-1 at 7), filed a suit on one outstanding loan against Knight and Milford in the Superior Court of Sussex County, Delaware ( Id.), and has taken action to begin foreclosing on Plaintiffs' real estate in Delaware, Maryland, and Florida ( Id. at 8-9).
In the Queen Anne's case, the state court granted Knight and Love Point's motion to vacate the confessed judgment on October 28, 2014. ( Id. at 7.) Knight and Love Point have since filed an answer and counterclaims. (ECF Nos. 42, 42-1, and 42-2.) This Court takes judicial notice that Defendant has filed a motion to dismiss those counterclaims, and there is a pending motion to intervene (presumably by Milford). Cir. Ct. Queen Anne's County, No. 17-C-14019056, Doc. 44, filed January 15, 2015, available at http://casesearch.courts.state.md.us/inquiry/inquiryDetail.jis?caseId=17C14019056& loc=53& detailLoc=CC. The state court has also issued a scheduling order that sets deadlines for discovery and a settlement conference. Id.
This Court now reviews four pending motions in the following order: First, Plaintiffs' motion to stay (ECF No. 38); second, Defendant's motion to dismiss (ECF No. 28); third, Defendant's motion to strike Plaintiffs' jury demand (ECF No. 26); and fourth, Plaintiffs' motion to seal their amended complaint (ECF No. 18).
B. PLAINTIFFS' MOTION TO STAY (ECF No. 38)
Plaintiffs invoke the doctrine of Colorado River abstention, and ask this Court to stay its proceedings for as long as the Queen Anne's case persists. Federal courts have a " virtually unflagging obligation" to exercise the jurisdiction given to them. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). In fact, they " have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not." Chase Brexton Health Servs. v. Maryland, 411 F.3d 457, 462 (4th Cir. 2005) (quoting Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404, 5 L.Ed. 257 (1821)). Under the Colorado River doctrine, abstention " is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it," id. at 463 (quoting Colorado River, 424 U.S. at 813), and is only appropriate " in the exceptional circumstances where a federal case duplicates contemporaneous state proceedings and wise judicial administration . . . clearly favors abstention." Vulcan Chem. Techs., Inc. v. Barker, 297 F.3d 332, 340-41 (4th Cir. 2002). Even if such circumstances do exist, the decision whether to exercise jurisdiction is then committed to the sound discretion of the district court. See Chase Brexton, 411 F.3d at 464. This case does not present the requisite exceptional circumstances to justify such discretionary abstention.
Colorado River abstention analysis begins with a threshold inquiry about whether " parallel" suits are pending in state and federal court. Great Am. Ins. Co. v. Gross, 468 F.3d 199, 207 (4th Cir. 2006). " Suits are parallel if substantially the same parties litigate substantially the same issues in different forums." New Beckley Mining Corp. v. ...