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Wiggins v. FDIC

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

November 2, 2017

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

          MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFFS' MOTION TO DISMISS AMENDED COUNTERCLAIM [1]

          STACI G. CORNELIUS U.S. MAGISTRATE JUDGE

         This action is currently before the court on Robert L. Wiggins, Jr. and Wolf Pup, LLC's ("Wolf Pup") (collectively, "Plaintiffs") motion to dismiss the amended counterclaim for fraudulent misrepresentation asserted against them by defendants/counterclaim plaintiffs Frank P. Ellis, IV ("Ellis") and Character Counts, LLC ("CCLLC"). (Doc. 194). The motion is fully briefed and ripe for review. (Docs. 194, 201 & 206). After careful consideration of the amended counterclaim and the parties' briefing, and for the reasons set forth below, the court denies Plaintiffs' motion.

         I. STANDARD OF REVIEW

         Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a 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). Under Rule 12(b)(6), a counterclaim defendant may move to dismiss a counterclaim for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). 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.

         II. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND [2]

         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). Wiggins and third-party defendant/counterclaim plaintiff Linda J. Peacock ("Peacock") are indirect members of Wolf Pup. (Doc. 187 at ¶¶ 2 & 4).[3] Ellis is an owner and member of CCLLC. (See Doc. 187 at ¶ 26; Doc. 206-2). CCLLC purchased the Property from Wolf Pup by assuming the loan. (Doc. 183-1).

         CCLLC and Ellis allege that Wiggins and Peacock directed Scott Raley, an owner/member of Wolf Pup, to inform Ellis that the Property "was a legally created, ready-to-sell condominium project" even though they knew of problems with the creation of the condominiums units. (Doc. 187 at ¶¶ 18-19, 33, & 50-52; see also Doc. 194-3 at 3). CCLLC and Ellis also allege that Wiggins and Peacock informed them "the condominium units were properly formed under applicable law" to induce them to purchase the Property. (Doc. 187 at ¶¶ 52, 62-63). After CCLLC purchased the Property, Ellis and CCLLC learned the declaration of condominium for the Property was defective and failed to 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; Doc. 187-2). 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).[4]

         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 Peacock (Doc. 112). Plaintiffs moved to dismiss the counterclaims asserted against them pursuant to Rule 12(b)(6), and this court granted their motion in part and denied it in part. (Docs. 118, 180 & 181). Relevant to Plaintiffs' pending motion, the court granted Plaintiffs' prior motion with respect to Ellis and CCLLC's claims for fraudulent suppression and fraudulent misrepresentation. (Doc. 181). The court dismissed the claim for fraudulent misrepresentation without prejudice and gave Ellis and CCLLC leave to reassert the claim. (Id.). Following the court's order, Ellis and CCLLC filed an amended counterclaim for fraudulent misrepresentation. (Doc. 187).

         III. ANALYSIS

         To allege a claim for fraudulent misrepresentation against Plaintiffs, Ellis and CCLLC must allege facts showing "(1) a false representation (2) of a material existing fact (3) reasonably relied upon by [Ellis and CCLLC] (4) who suffered damage as a proximate consequence of the misrepresentation." Exxon Mobil Corp. v. Ala. Dep't of Conservation and Nat. Res., 986 So.2d 1093, 1114 (Ala. 2007) (quotation and emphasis omitted). Plaintiffs contend Ellis and CCLLC's amended counterclaim for fraudulent misrepresentation should be dismissed under Rule 12(b)(6) because they did not allege a plausible claim. (Doc. 194). Plaintiffs present numerous arguments to support their contention, and the court addresses each argument in turn.[5]

         A. Allegations of Misrepresentations

         Plaintiffs first assert that Ellis and CCLLC's amended counterclaim for fraudulent misrepresentation must be dismissed because it is based on the same suppression-based allegations the Court previously found insufficient to state a viable claim of fraudulent suppression. (Doc. 194 at 2-3, 5-9). Plaintiffs argue the amended counterclaim "is explicit in treating silence and non-disclosure as 'representations' and 'communications.'" (Id. at 5).

         Although the amended counterclaim contains many allegations that Plaintiffs suppressed material information, it also contains allegations that Plaintiffs made, or were responsible for, false representations regarding the Property. In particular, Ellis and CCLLC allege: (1) "Ellis had communications with the members of Wolf Pup regarding a potential purchase of [the Property];" (2) "Raley, at the direction of Wiggins [], informed Ellis that [the Property] was a legally created, ready-to-sell condominium project;"[6] (3) "Wolf Pup [and] Wiggins [] continued to represent to CCLLC, Ellis, and Superior that the units could be sold as a means of paying off the indebtedness due to Superior;" (4) Wiggins purported to convey a condominium unit at the Property to Ellis; (5) "Wiggins [], individually and on behalf of Wolf Pup, . . . represented to Ellis and CCLLC that [the Property] was a legally created, ready-to-sell condominium project by executed deeds purporting to transfer the units and in other documents acknowledging the purported existence of the units;" (6) "in communications with Ellis and CCLLC . . . Wiggins [], both in [his] individual capacity[y] and as [a] member[] of Wolf Pup, informed Ellis and CCLLC that the condominium units were properly formed under applicable law, ready for resale as 62 separate units;" and (7) "in ongoing communications throughout August, September, October, and November 2007, Wiggins [], individually and on behalf of Wolf Pup, informed Ellis and CCLLC that [the Property] was a legally created, ready-to-sell condominium project." (Doc. 187 at ¶¶ 18-19, 33, 41-42, 52, 56). At this stage in the litigation, the court must accept the truth of these allegations and view them in the light most favorable to Ellis and CCLLC. See Adinolfe, 768 F.3d at 1169 (citations omitted).

         The allegations, when viewed in the light most favorable to Ellis and CCLLC, show Plaintiffs did not just conceal or suppress material information. Instead, Ellis and CCLLC allege Plaintiffs made false representations of a material fact regarding the Property. (Doc. 187 at ¶¶ 18-19, 33, 41-42, 52, 56). Thus, the court is not persuaded by ...


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