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Wiggins v. FDIC

United States District Court, N.D. Alabama, Southern Division

October 10, 2017

ROBERT L. WIGGINS, JR., et al., Plaintiffs,
FDIC, as Receiver of Superior Bank, et al., Defendants.



         This case is before the court on Linda J. Peacock's motion to dismiss the fraudulent misrepresentation counterclaim asserted against her by Frank P. Ellis, IV, and Character Counts, LLC, in response to her counterclaims for declaratory judgment. (Doc. 192). The motion is fully briefed and ripe for review. (Docs. 192, 198 & 203). After careful consideration of the parties' briefing, and for the reasons set forth below, the court denies Peacock's motion to dismiss.


         Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint or counterclaim to contain “a short plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the complaint or counterclaim. See Fed. R. Civ. P. 12(b)(6). Under Rule 12(b)(6), the defendant or counterclaim defendant bears the burden of demonstrating that the complaint or counterclaim fails “to state a claim upon which relief can be granted.” See Id. To withstand a 12(b)(6) motion, a pleading “must allege ‘enough facts to state a claim to relief that is plausible on its face.'” Adinolfe v. United Tech. Corp., 768 F.3d 1161, 1169 (11th Cir. 2014) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A pleading “does not need detailed factual allegations, ” but “a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555.

         When deciding a motion to dismiss a counterclaim under Rule 12(b)(6), a court must assume the truth of the factual allegations in the counterclaim and view those facts in the light most favorable to the counterclaim plaintiff. See Adinolfe, 768 F.3d at 1169 (citations omitted). However, “the tenet that a court must accept as true all of the allegations contained in a [counterclaim] is inapplicable to legal conclusions” couched as factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). Additionally, when deciding a motion to dismiss, a court may not dismiss a counterclaim merely because it appears unlikely the counterclaim plaintiff will ultimately prevail on the merits. See Twombly, 550 U.S. at 563 n.8.


         Plaintiff Wolf Pup, LLC (“Wolf Pup”), owned a condominium development in Baldwin County, Alabama (the “Property”) that was financed through a loan with Superior Bank. (Doc. 187 at ¶ 3). Plaintiff Robert L. Wiggins, Jr. (“Wiggins”), [3] and third-party defendant/counterclaim plaintiff Linda J. Peacock (“Peacock”) are indirect owners and members of Wolf Pup. (Doc. 187 at ¶¶ 2 & 4). Defendant/counter-plaintiff Character Counts, LLC (“CCLLC”), purchased the Property from Wolf Pup by assuming the loan. (Doc. 183-1).

         CCLLC and defendant/counter-plaintiff Frank Ellis, IV (“Ellis”), allege Wiggins and Peacock directed Scott Raley, another indirect owner and member of Wolf Pup, to inform Ellis that the Property “was a legally created ready-to-sell condominium project” even though they knew there were problems relating to the creation of the condominiums units. (Doc. 187 at ¶¶ 5-6, 17, 19, 33, & 50-52). After CCLLC purchased the Property, Ellis and CCLLC learned the declaration of condominium for the Property was defective and failed to legally create any condominium units for resale. (See Id. at ¶ 45). Accordingly, the Property was worth less than the $23 million CCLLC and Ellis had anticipated it was worth. (See Id. at ¶ 53). Ellis later purchased the loan from Superior Bank, foreclosed on the mortgage securing the Property, and sold the Property to another entity. (See Doc. 119-8). This action followed.

         Plaintiffs initiated this action in 2012 against the FDIC as receiver of Superior Bank and amended their complaint in 2015 to assert claims against the FDIC, Ellis, and CCLLC. (Docs. 1 & 22). After Plaintiffs filed a second amended complaint in 2016 (Doc. 94), Ellis and CCLLC asserted amended counterclaims against Plaintiffs and third-party claims against Peacock.[4] (Doc. 112). Peacock moved to dismiss the claims asserted against her pursuant to Rule 12(b)(6), and this court granted her motion in part and denied it in part. (Docs. 117, 181). The court granted Peacock's motion with respect to Ellis and CCLLC's claims for fraudulent suppression, fraudulent misrepresentation, and unjust enrichment and denied her motion with respect to Ellis's breach of guaranty claim. (Id.).

         Relevant to the current motion to dismiss, Peacock argued in her prior motion that Ellis and CCLLC's claim for fraudulent misrepresentation was barred by the statute of limitations. (Doc. 117 at 8-10). The undersigned agreed and recommended[5] the fraudulent misrepresentation claim be dismissed against Peacock based on the statute of limitations. (Doc. 158 at 27). The undersigned also found that the fraudulent misrepresentation counterclaim asserted against Plaintiffs was not subject to a statute of limitations defense under Alabama law and recommended that Ellis and CCLLC be given an opportunity to amend their counterclaim to state their claim with particularity. (Id. at 27 & 31). The district judge adopted the Report and Recommendation and entered an order dismissing the fraudulent misrepresentation claim against Peacock with prejudice based on the statute of limitations and giving Ellis and CCLLC an opportunity to reassert the fraudulent misrepresentation claim against Plaintiffs. (Doc. 181).

         Following the order granting in part and denying in part Peacock's motion to dismiss, Peacock answered the breach of guaranty claim and asserted counterclaims against Ellis and CCLLC, seeking a declaratory judgment releasing her as a guarantor of the loan, along with an award of attorneys' fees, expenses, and “all other damages permitted in law or equity.” (Doc. 183). Ellis and CCLLC answered Peacock's counterclaims and reasserted their fraudulent misrepresentation claim against Peacock as a counterclaim-in-reply to her counterclaims for declaratory judgment. (Docs. 187 & 188).

         III. ANALYSIS

         Peacock argues that Ellis and CCLLC's counterclaim-in-reply must be dismissed because the court dismissed Ellis and CCLLC's prior fraudulent misrepresentation claim against her, the Federal Rules of Civil Procedure do not allow for a counterclaim-in-reply, the court denied Ellis and CCLLC's request for leave to amend their fraudulent misrepresentation claim against Peacock, and she did not have a duty to disclose any information to Ellis or CCLLC. (Doc. 192). The court addresses Peacock's arguments in turn.

         A. Peacock Did Not Show the Counterclaim-In-Reply is Barred bythe ...

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