United States District Court, District of Columbia
ROSEMARY M. COLLYER UNITED STATES DISTRICT JUDGE.
Brandon Mill, LLC and H. Pace Burt, Jr. complain that the
Federal Deposit Insurance Corporation (FDIC), acting as
receiver for a now-defunct Louisiana bank, breached its
fiduciary duty and contractual obligations by failing to
respond to Plaintiffs' request for consent to refinance a
historic redevelopment project in Greenville, South Carolina.
Plaintiffs claim that FDIC is liable in contract and in tort
by interfering with Plaintiffs' effort to refinance a
construction loan, which resulted in Plaintiffs receiving
less favorable terms on a subsequent loan. FDIC opposes,
arguing that Plaintiffs have failed to establish that a
contract existed or that FDIC owed Plaintiffs any relevant
legal duties. The matter is ripe for review.
argues that the Court lacks subject matter jurisdiction over
the tort counts in Plaintiffs' Complaint, which must be
brought against the United States under the Federal Tort
Claims Act, and not against an individual agency such as the
FDIC. Plaintiffs ask the Court to accept their proposed
Amended Complaint, which substitutes the United States of
America for FDIC as defendant to the tort
counts. FDIC asks the Court to disallow the
Amended Complaint, arguing that the counts as amended could
not withstand a motion to dismiss, and that all counts are
Court will grant FDIC's Motion to Dismiss as to all
counts. The Court will deny Plaintiffs' Motion to Amend
the Complaint because it would be futile.
Burt, Jr. is a real estate developer who purchases,
renovates, and operates historic properties through limited
liability companies (LLCs). Compl. [Dkt. 1] ¶¶ 6-7.
The LLCs take advantage of federal and state tax credits,
such as the federal rehabilitation tax credit, 26 U.S.C.
§ 47, which are available to owners who renovate and
restore historic structures. Id. ¶ 9. One such
historic property was a textile mill complex in Greenville,
South Carolina called Brandon Mill, which Mr. Burt planned to
convert into loft apartments (the Project). Id.
¶ 23. Mr. Burt invested $1 million in personal funds in
the Project and expected to receive a developer fee of $2.5
million at the conclusion of the Project. Id. ¶
2015, Mr. Burt formed several LLCs to own, operate, and
generate tax credits for the Project. Id. ¶ 24.
Mr. Burt formed Brandon Mill, LLC, to serve as the owner and
operator of the Project (Mill Owner). Id. ¶ 25.
Mill Owner consisted of two members: Brandon Mill Tenant, LLC
(Mill Tenant) and Brandon Mill Investor, LLC (Mill Investor).
Id. Mill Tenant was the lessee of the Project. NBC
Historic Tax Partners (Tax Partners), a Louisiana LLC that
was a subsidiary owned by First NBC Bank (First NBC or the
Bank), invested in Mill Tenant as an “investor
member.” Id. ¶¶ 32-33. Tax
Partners' primary motivation for investing in Mill Tenant
was to receive the tax credits generated by the Project. A
separate entity, Brandon Mill Manager, LLC (Mill Manager) was
formed to serve as the managing member of Mill Tenant.
Id. ¶ 27. Mr. Burt owns a 45% membership
interest in Mill Manager.
relationship between Mill Manager and Tax Partners was set
forth in the Mill Tenant Operating Agreement (MT Operating
Agreement). Id. ¶ 35; see also Ex. 2,
Opp'n, MT Operating Agreement [Dkt. 9-1]. The MT
Operating Agreement stated that Mill Manager was responsible
for the day-to-day operations of Mill Tenant; however, Mill
Manager could not cause Mill Tenant to incur debt without the
consent of Tax Partners. Id.; see also MT
Operating Agreement at 20. While Tax Partners had the right
to withhold consent to refinance, the MT Operating Agreement
stated that consent “may not be unreasonably
withheld.” Opp'n at 11; see also MT
Operating Agreement at 6. A related governing document was
the Master Lease between Mill Owner and Mill Tenant. Ex. 3,
Opp'n, Master Lease [Dkt. 9-1]. The Master Lease stated
that Mill Owner could only refinance the Project's
construction loan with the approval of Tax Partners, the
investor member in the Project. Compl. ¶ 36; see
also Master Lease at 28. The Master Lease also stated
that Tax Partners could grant or withhold consent to
refinance the construction loan “in [its] sole and
absolute discretion.” Master Lease at 28. A
third governing document, the Mill Owner Operating Agreement
between Mill Tenant and Mill Investor (MO Operating
Agreement), apparently provided that Mill Tenant's
consent was required for Mill Owner to refinance the
Project's construction loan. Compl. ¶
Owner financed construction of the Project through an $18
million loan from BB&T Corporation (the BB&T
Construction Loan). Id. ¶ 31. The BB&T
Construction Loan was not permanent financing; the terms were
less favorable than what Mill Owner hoped to negotiate once
the Project achieved 80% occupancy and became eligible for
permanent financing. See Id. ¶¶ 12, 31.
The BB&T Construction Loan had a floating interest rate,
which exposed the Project to the risk of an increase in the
loan interest rate, and the Loan required a personal guaranty
from Mr. Burt. In early February 2017, the Project achieved
80% occupancy and Mill Owner began seeking opportunities to
refinance the BB&T Construction Loan. Id. ¶
37. Mr. Burt's LLCs had worked with First NBC in the
past, and on previous projects First NBC had provided
“timely consent to the LLCs incurring and refinancing
debt.” Id. ¶ 19.
April of 2017, the Louisiana Office of Financial Institutions
closed First NBC and FDIC was named receiver for First NBC.
Id. ¶ 38. Plaintiffs claim that soon after,
FDIC notified Plaintiffs that it would be assuming Tax
Partners' role in the Project. Specifically, Plaintiffs
claim that an individual named “Brad Calloway, who had
been employed by First NBC Bank and was retained and employed
by the FDIC, officially notified Mill Tenant and Mill Manager
that, in its capacity as receiver for First NBC Bank, the
FDIC would be operating and acting for Tax Partners.”
Id. ¶ 39. Plaintiffs note that FDIC began
looking for ways to liquidate First NBC's assets and, in
May 2017, Mr. Calloway asked Mill Manager to make an offer to
purchase Tax Partners' membership interest in Mill
Tenant. Id. ¶ 41. Mill Manager offered
approximately $90, 000 but FDIC did not respond. Id.
April and June 2017, the Project received an offer of
financing from Arbor Commercial Funding for refinancing of
the BB&T Construction Loan (the Arbor Terms).
Id. ¶ 43. The Arbor Terms included a principal
loan of $20 million, which Plaintiffs state was an amount
necessary to refinance the $18 million balance on the
Construction Loan, repay Mr. Burt his $1 million investment
in the Project, and cover the $2.5 million developer fee.
Id. ¶ 44. The Arbor Terms included a projected
interest rate of 3.96% and did not require a personal
guaranty from Mr. Burt. Plaintiffs claim that during the
summer of 2017, they made repeated requests that FDIC consent
to refinancing under the Arbor Terms; however, FDIC took no
October 2017, Brandon Mill was able to find an alternative
commitment to refinance the BB&T Construction Loan from
Synovus Financial Corporation (the Synovus Commitment).
Id. ¶ 55. The Synovus Commitment was for a loan
of $18 million, with an interest rate of 4.15%, and required
Mr. Burt's personal guaranty. Plaintiffs claim that FDIC
initially “promis[ed] to consider the Synovus
Commitment, but tied that issue to the terms on which Tax
Partners would ‘exit' the deal, i.e. the purchase
of Tax Partners' interest in Mill Tenant.”
Id. ¶ 57. Mr. Burt then threatened FDIC with
legal action if it did not consent to the Synovus Commitment,
and FDIC consented to the refinancing. Id. ¶
59. Plaintiffs allege that despite giving consent,
“FDIC continued to use improper leverage in an attempt
to force Mill Manager to buy out Tax Partners' interest
in Mill Tenant at an excessive price.” Id.
¶ 60. Specifically, in November 2017, an FDIC employee
demanded that Mill Manager make an offer to purchase Tax
Partners' interest in the $6 to $10 million range, far in
excess of the $90, 000 offer that Mill Manager had made in
May 2017. Id.
Owner closed on refinancing with Synovus in January 2018.
Id. ¶ 61. Plaintiffs claim that since the
amount of the Synovus Commitment was only for $18 million,
Mill Owner “does not currently have the capital
necessary to fund the $2.5 million developers [sic]
March 2018, Brandon Mill and Mr. Burt each filed
administrative claims with FDIC for damages resulting from
FDIC's failure to approve the refinancing with Arbor.
Mot. at 4. On August 8, 2018, FDIC disallowed both
administrative claims. Id. Plaintiffs then filed
this lawsuit in October 2018 alleging breach of fiduciary
duty, breach of contract, negligence, and violations of the
South Carolina Limited Liability Company Act. Compl.
February 28, 2019, FDIC filed a Motion to Dismiss pursuant to
Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1), for
failure to state a claim upon which relief can be granted and
for lack of subject-matter jurisdiction. See Mot.
FDIC argues that Plaintiffs fail to state a contract claim
against FDIC because there was no contract between Plaintiffs
and FDIC or First NBC. Id. at 1. FDIC asserts that
the tort claims also must fail since Plaintiffs have not
demonstrated that FDIC, as receiver for First NBC, owed any
duties to Plaintiffs. FDIC claims that Plaintiffs sued the
wrong party, since Tax Partners is a distinct entity from
First NBC, Tax Partners' parent company. Reply at 1-2.
further argues that the Court lacks subject-matter
jurisdiction over the tort claims because Plaintiffs needed
to bring such claims under the Federal Tort Claims Act
(FTCA), 28 U.S.C. § 2671 et seq., and include
the United States as a named defendant. Id.
Plaintiffs apparently concede this point and
“respectfully seek leave to amend their complaint to
add the United States of America as the proper defendant for
Plaintiffs' tort claims.” Opp'n at 14 (citing
LCvR 15.1). Plaintiffs attach a proposed Amended Complaint as
Exhibit 1 to the Opposition. FDIC asks the Court to deny
Plaintiffs' request to amend, arguing that the Amended
Complaint could not withstand a motion to dismiss. Reply at
Motion to Dismiss Under Rule 12(b)(1)
Rule of Civil Procedure 12(b)(1) allows a defendant to move
to dismiss a complaint, or any portion thereof, for lack of
subject-matter jurisdiction. Fed.R.Civ.P. 12(b)(1). No.
action of the parties can confer subject-matter jurisdiction
on a federal court because subject-matter jurisdiction is
both a statutory requirement and an Article III requirement.
Akinseye v. District of Columbia, 339 F.3d 970, 971
(D.C. Cir. 2003). The party claiming subject-matter
jurisdiction bears the burden of demonstrating that such
jurisdiction exists. Khadr v. United States, 529
F.3d 1112, 1115 (D.C. Cir. 2008); see also Kokkonen v.
Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)
(noting that federal courts are courts of limited
jurisdiction and “[i]t is to be presumed that a cause
lies outside this limited jurisdiction, and the burden of
establishing the contrary rests upon the party asserting
Motion to Dismiss Under Rule 12(b)(6)
motion to dismiss for failure to state a claim pursuant to
Federal Rule of Civil Procedure 12(b)(6) challenges the
adequacy of a complaint on its face. Fed.R.Civ.P. 12(b)(6).
To survive a motion to dismiss, a complaint must contain
sufficient factual information, 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 Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). A court must assume the truth of all
well-pleaded factual allegations and construe reasonable
inferences from those allegations in favor of the plaintiff.
Sissel v. Dep't of Health & Human Servs.,
760 F.3d 1, 4 (D.C. Cir. 2014). A court need not accept
inferences drawn by a plaintiff if such inferences are not
supported by facts set out in the complaint. Kowal v. MCI
Commc'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994).
Further, a court need not accept as true legal conclusions
set forth in a complaint. Iqbal, 556 U.S. at 678. In
deciding a motion under Rule 12(b)(6), a court may consider
the facts alleged in the complaint, documents attached to the
complaint as exhibits or incorporated by reference, and
matters about which the court may take judicial notice.
Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052,
1059 (D.C. Cir. 2007).
Subject-Matter Jurisdiction under the Federal Tort Claims
FTCA provides a limited waiver of sovereign immunity for
civil actions seeking money damages from the United
States. The limited waiver of sovereign immunity
only extends to the United States and not to specific
agencies within the federal government. See 28
U.S.C. § 2679(a). Thus, FTCA suits “must name the
United States as defendant.” Goddard v. D.C.
Redevelopment Land Agency, 287 F.2d 343, 345-46 (D.C.
Cir. 1961); see also Cox v. Sec'y of Labor, 739
F.Supp. 28, 29 (D.D.C. 1990) (granting defendant's motion
to dismiss when plaintiff sued the Secretary of Labor rather
than the United States); Johnson v. Veterans Affairs Med.
Ctr., 133 F.Supp.3d 10, 17 (D.D.C. 2015) (granting
defendant's motion to dismiss when plaintiff sued the
Veterans Affairs Medical Center and failed to name the United
States as a defendant). “Failure to name the United
States as the defendant in an FTCA action requires dismissal
for lack of subject-matter jurisdiction.”
Johnson, 133 F.Supp.3d at 17.
filing suit in court, the FTCA requires plaintiffs to exhaust
their administrative remedies by “first present[ing]
the claim to the appropriate Federal agency” and
obtaining a “final disposition” in writing. 28
U.S.C. § 2675(a); see also McNeil v. United
States, 508 U.S. 106, 113 (1993). The exhaustion
requirement is jurisdictional. GAF Corp. v. United
States, 818 F.2d 901, 904 (D.C. Cir. 1987).