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Presidential Bank, FSB v. 1733 27th Street Se LLC

United States District Court, District of Columbia

September 22, 2017

PRESIDENTIAL BANK, FSB, Plaintiff & Counter-Defendant,
v.
1733 27TH STREET SE LLC, et al., Defendants & Counter-Claimants. Re Document Nos. 17, 26, 29

         MEMORANDUM OPINION GRANTING DEFENDANTS' MOTION FOR LEAVE TO LATE FILE OPPOSITION TO PLAINTIFF'S MOTION TO PARTIALLY DISMISS; GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO PARTIALLY DISMISS DEFENDANTS' COUNTERCLAIM; DENYING AS MOOT DEFENDANTS' MOTION FOR LEAVE TO LATE FILE OPPOSITION CONCERNING LIS PENDENS

          RUDOLPH CONTRERAS UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         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.

         II. BACKGROUND

         A. Factual Background

         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[1] and Kevin Green. Defs.' Affirmative Defenses, Answers & Counter-Claims (Defs.' Answer) at 19- 20, ECF No. 12. Mr. Green is an individual and “sole management-member of the counter-plaintiff Limited Liability Companies.” Defs.' Answer at 20.

         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 state court, which is currently pending appeal at the Maryland Court of Special Appeals. Defs.' Answer at 24. Problems between Plaintiff and Defendants persisted, and in 2015 the parties entered into a second modification agreement, the Forbearance Agreement.[2] Defs.' Answer at 25; see also Compl. ¶ 12; Forbearance Agreement, ECF No. 17-2. According to Defendants, the Forbearance Agreement “gave Presidential total control over Borrowers' business, ” including “control of . . . rental payments” made to Defendants by their tenants. Defs.' Answer at 25; see also Compl. ¶¶ 16-20.

         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.

         B. Procedural History

         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.[3] Subsequently, Defendants unsuccessfully sought either that the case be stayed or that a temporary restraining order issue. Defs.' Emergency Mot. Stay or Temp. Restraining Order, ECF No. 8; Minute Entry of January 6, 2017; Order, ECF No. 11 (denying Defendants' motion for a stay or temporary restraining order). As an ancillary matter, Plaintiff filed an emergency motion requesting that this Court cancel a lis pendens[4] recorded by Defendants, Pl.'s Emergency Mot. Order Canceling Lis Pendens, ECF No. 15, and this Court granted the motion as conceded after Defendants failed to oppose it.[5] Order, ECF No. 23.

         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, in various ways, that Plaintiff wrongfully used the Forbearance Agreement to “intentionally, deliberately and maliciously force[] Borrowers' respective mortgage accounts into delinquency.”[6] Defs.' Answer at 25.

         The Court now addresses Plaintiffs 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[7]; Defs.' Counterclaim, ECF No. 17; see also Mem. P. & A. Supp. Pl.'s Mot. Dismiss (Pl.'s Partial MTD), ECF No. 17-1. Defendants did not oppose this motion within time, but now move to for leave to late file their opposition, Defs.' Mot. Leave Late File Opp'n Pl.'s Mot. Dismiss, ECF No. 29, a motion which Plaintiff opposes, Pl.'s Opp'n Defs.' Mot. Late File Opp'n (Pl.'s Opp'n Leave File), ECF No. 30. Defendants' motion for leave to late file its opposition contained as an attachment Defendants' substantive opposition to Plaintiffs partial motion to dismiss, see generally Defs.' Mot. Leave File, Defs.' Mem. Opp'n Pl.'s Mot. Dismiss Counterclaim (Defs.' Opp'n), ECF No. 29-1, and Plaintiffs opposition to Defendants' motion for leave also contains Plaintiffs' substantive responses to Defendants' motion, see generally Pl.'s Opp'n Leave File. Therefore, having determined that Defendants should be granted leave to late file their opposition, [8] and having considered the substantive arguments presented in Defendants' opposition and Plaintiff's responses to them, Plaintiff's motion to partially dismiss the counterclaim is ripe for adjudication.

         III. LEGAL STANDARD

         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 (2009) (internal quotation marks omitted); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562 (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 (citing Twombly, 550 U.S. at 557). “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. 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 (citing Twombly, 550 U.S. at 555).

         IV. DISCUSSION

         Plaintiff moves to dismiss Counts I, II, III, V, VI, and IX of Defendants' counterclaim. The Court addresses each in turn.

         A. Count I-ECOA

         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,

It shall be unlawful for any creditor to discriminate against any applicant with respect to any aspect of a credit transaction-
(1) on the basis of race [or] color . . .
(2) because all or part of the applicant's income derives from any public ...

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