Bank of America, National Association v. Federal Deposit Insurance Corporation

• Court: District Court, District of Columbia
• Decided: December 11, 2012
• Docket: Civil Action No. 2010-1681
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

BANK OF AMERICA, N. A., As Indenture Trustee, Custodian, and Collateral Agent for OCALA FUNDING, LLC,

Plaintiff and Counterclaim Defendant,

v. Civil Action No. 10-CV-1681 (BJR)

FEDERAL DEPOSIT INSURANCE MEMORANDUM OPINION ON CORPORATION, in its capacity as the CROSS MOTIONS TO DISMISS Receiver for COLONIAL BANK, and in its capacity as the Receiver for PLATINUM COMMUNITY BANK,

Defendant and Counterclaim Plaintiff.

I. INTRODUCTION ................................................................................................................................ 2 II. SUMMARY OF THE CASE ................................................................................................................ 3 A. Overview of TBW’s Operation ......................................................................................................... 4 B. Factual Background Common to All Claims .................................................................................... 6 D. Factual Allegations Specific to BOA’s Claims Against the FDIC ................................................... 9 E. Factual Allegations Specific to the FDIC’s Counterclaims Against BOA ..................................... 12 III. PROCEDURAL HISTORY............................................................................................................ 14 IV. DISCUSSION ................................................................................................................................. 15 A. Standards of Review ....................................................................................................................... 15 B. The FDIC’s Motion to Dismiss the Amended Complaint .............................................................. 18 1. Whether This Court Has Subject Matter Jurisdiction over BOA’s Claims................................. 18 a. Whether BOA Exhausted the Administrative Remedies under FIRREA on behalf of Ocala. 19 b. Whether BOA Has Standing to Bring Claims on Behalf of DB and BNP.............................. 27 i. Whether DB and BNP Have Article III Standing ............................................................... 28 ii. Whether BOA Can Pursue the Claims on Behalf of DB and BNP ..................................... 30 c. Whether Counts IX, X, and XI Have Been Administratively Exhausted under FIRREA ...... 32

1 2. Whether the Amended Complaint States a Claim for Fraudulent Transfer ................................ 33 3. Whether the Amended Complaint Pleads Fraud with the Requisite Specificity......................... 39 C. BOA’s Motion to Dismiss the FDIC’s Counterclaims .................................................................. 42 1. Whether the Counterclaims are Barred by the Exculpatory Clauses .......................................... 44 2. Whether the Counterclaims State a Claim for Breach of the Custodial Agreement ................... 49 a. Counterclaim 1 ........................................................................................................................ 49 b. Counterclaim 2 ........................................................................................................................ 51 c. Counterclaim 3 ........................................................................................................................ 52 d. Counterclaim 4 ........................................................................................................................ 53 e. Counterclaim 5 ........................................................................................................................ 54 3. Whether the Breach of Bailment Counterclaims Fail as a Matter of Law .................................. 55 a. Whether the Bailee Letters Are Enforceable Contracts between Colonial and BOA ............. 57 b. Whether the Breach of Bailment Counterclaims State a Claim for Relief.............................. 65 4. Whether the Tort Counterclaims Fail As a Matter of Law ......................................................... 68 a. Whether the Economic Loss Doctrine Bars the Tort Claims .................................................. 69 b. Whether the Custodial Agreement Limits BOA’s Tort Liability............................................ 70 V. CONCLUSION ................................................................................................................................... 71 ______________________________________________________________________________

I. INTRODUCTION

Before the Court are two motions to dismiss. First, Defendant and Counterclaimant

Federal Deposit Insurance Corporation (the “FDIC”), in its capacity as the Receiver for both

Colonial Bank (“Colonial”) and Platinum Community Bank (“Platinum”), moves to dismiss the

First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6). (Dkt.

No. 26.). Second, Plaintiff and Counterclaim-Defendant Bank of America, N.A., (“BOA”)

moves to dismiss the FDIC’s Counterclaims pursuant to Rule 12(b)(6). (Dkt. No. 36.). Having

considered the parties’ arguments, pleadings, and the relevant case law, the court is fully advised.

For the reasons set forth below:

2 IT IS HEREBY ORDERED that each motion is GRANTED in part and DENIED in

part.

II. SUMMARY OF THE CASE

This dispute is the result of a multi-billion dollar fraudulent scheme that left the financial

sector reeling. The scheme was orchestrated by Lee Farkas, the former chairman of Taylor, Bean

& Whitaker Mortgage Corp. (“TBW”), with the aid of several bank employees from Colonial

and Platinum. 1 It stemmed from TBW’s loan origination business, which started with humble

roots in 1982, but grew at a frenetic pace as the United States’ housing bubble grew. When the

housing market began to crumble, so did TBW’s finances. In 2002, Farkas and his co-

conspirators hid TBW’s financial decline through a complex scheme that evolved over several

stages. Initially, they disguised overdrafts on TBW’s bank accounts held at Colonial by

“sweeping” funds from other accounts into the overdrawn accounts. As TBW’s deficit grew to

well over $100 million, Farkas and his co-conspirators initiated more sophisticated measures,

including selling sham mortgage loans, multi-pledging collateral, and overstating the actual

value of TBW’s and its subsidiaries’ assets. In the final stage of the scheme, Farkas and his co-

conspirators attempted to fraudulently obtain $553 million from the Troubled Asset Relief

Program. The scheme was eventually uncovered in August 2009. Farkas is now serving a 30-

year sentence after being convicted in April 2011 of 14 counts of conspiracy and bank, wire, and

securities fraud. A handful of other executives from TBW and Colonial have also been sentenced

to prison for their roles in the fraud.

TBW’s loan origination business operated through a complex web of financial

agreements between multiple financial institutions. When TBW collapsed, these institutions were

left behind in the wreckage. Many of these institutions turned to the courts to determine liability 1 The FDIC disputes whether Platinum employees were involved in the fraud.

3 for the multi-billion dollar losses caused by the fraud. This is one such case. In this case, BOA,

acting in its capacity as the Indenture Trustee, Custodian, and Collateral Agent for one of TBW’s

subsidiaries, Ocala Funding, LLC (“Ocala”), seeks to recover approximately $1.7 billion from

the FDIC as the Receiver for the now defunct Colonial and Platinum banks. The FDIC, in turn,

has countersued. It seeks to recover $900 million from BOA for allegedly breaching its duties as

the Custodian and Bailee for Colonial.

A. Overview of TBW’s Operation

As previously stated, TBW operated through a complex web of financial arrangements

with a number of financial institutions who operated in a number of different capacities. Before

delving into the minutiae of these financing arrangements, it is helpful to understand the

interplay between the various entities implicated in this lawsuit.

The process started with TBW originating a mortgage loan for an individual homebuyer.

TBW funded the loan through a series of funding agreements it had with Colonial. Under these

agreements, Colonial advanced funds to TBW in exchange for a 99% ownership interest in the

loan; TBW retained a 1% ownership interest. At this point, Colonial and/or TBW sent the loan to

BOA to be held for the benefit of Colonial and TBW (in their respective ownership interests). In

this way, BOA acted as custodian and bailee of the loan for both Colonial and TBW.

Next, TBW’s subsidiary, Ocala, purchased Colonial’s 99% ownership interest in the

loan, thereby effectively paying Colonial back the amounts Colonial had extended to fund the

loan. Ocala raised the money needed to purchase Colonial’s 99% ownership interest by selling

short-term notes to outside investors, to wit, Deutsche Bank (“DB”) and BNP Paribas (“BNP”).

TBW then notified BOA of Ocala’s purchase of the loans and BOA would send the sale proceeds

to Colonial from an account that Ocala maintained at BOA. At this point, BOA’s relationship to

4 the loan changed. BOA still held the loan, but now it retained the loan as the indenture trustee,

custodian, and collateral agent for Ocala and Ocala’s outside investors (i.e., DB and BNP). BOA

held the loan in a collateral account that Ocala maintained at BOA.

Next, TBW arranged for Ocala to sell the loan to Freddie Mac. The proceeds from that

sale were placed in Ocala’s collateral account at BOA and were either used to pay back DB and

BNP or to purchase more loans from Colonial. Finally, BOA would send the loan to a Freddie

Mac custodial account at Colonial. The transaction was then complete.

The fractures in TBW’s operation were not discovered until TBW collapsed in August

2009. At that point, the participants realized that TBW had been manipulating the system. BOA

alleges that Farkas and employees at Colonial and Platinum fraudulently diverted virtually all of

Ocala’s assets, the result of which was that Ocala was unable to make payments to its outside

investors, and DB and BNP ultimately lost approximately $1.7 billion. BOA seeks to recover this

loss from the FDIC as the Receiver for both Colonial and Platinum. The FDIC, in turn, alleges

that at some point in 2008, TBW began to manipulate its operation such that thousands of loans

were pledged as collateral to Ocala, Colonial, and Freddie Mac at the same time. The FDIC

alleges that Colonial was unaware of this “multi-pledging scheme” and ultimately lost a total of

$900 million. The FDIC claims that BOA was complicit in the “multi-pledging” and seeks to

recover the $900 million loss from BOA.

With this background in mind, the Court now turns to the detailed factual allegations

asserted by both BOA and the FDIC.

5 B. Factual Background Common to All Claims 2

TBW was the largest independent (i.e., non-depository owned) mortgage originator 3 and

servicer 4 in the United States when it filed for Chapter 11 bankruptcy protection on August 24,

2009. (Dkt. No. 25 Answer to First Amended Complaint, Affirmative Defenses, and

Counterclaims, at ¶ 9; Dkt. No. 20 First Amended Complaint at ¶ 27; Final Reconciliation

Report of Debtor Taylor, Bean & Whitaker Mortgage Corp. (the “FRR”) 5 at p. 9, ¶ 1, In re

Taylor, Bean & Whitaker Mortg. Corp, No. 3:09-bk-07047-JAF (Bankr. M.D. Fla. filed Aug. 24,

2009), ECF No. 1644.). TBW provided mortgage financing to individual borrowers through a

network of independent mortgage brokers and community banks. (FRR at p. 13, ¶ 18.). Its

ultimate objective was to sell these mortgages to investors in the secondary market, typically

Freddie Mac, and retain the right to service the mortgages for the investors. (Id.; Dkt. No. 20 at ¶

31-32.).

In 2002 through 2009, TBW experienced tremendous growth in the number of loans it

originated. For example, in 2004, TBW originated a total of 59,129 loans representing a dollar

value in excess of $9.5 billion. (FRR at p. 14, ¶ 20.). By early 2009, TBW originated

approximately 14,500 new loans representing a dollar value in excess of $2.7 billion every

month. (Id.; Dkt. No. 20 at ¶¶ 29-30.).

2 Except when noted by the Court, these facts are not in dispute. 3 A “mortgage originator” is an institution that works with a borrower to complete a mortgage transaction. See http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea10.shtm. 4 A “mortgage servicer” is responsible for the day-to-day management of the mortgage loan account. See http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea10.shtm. A mortgage servicer may be a borrower’s lender, but often the beneficial rights of principal and interest on mortgages are sold to investors such as Freddie Mac, Fannie Mae, and private investors. Id. 5 BOA submitted the Final Reconciliation Report to this Court during the October 2, 2012 hearing (without objection from the FDIC) and both parties referenced the Report throughout the hearing. Accordingly, the Court will take judicial notice of the Report. See Miles v. State of California, 320 F.3d 986, 987 n. 1 (9th Cir. 2003) (district court taking judicial notice of related state court proceedings).

6 TBW required significant financing in order to fund its loans at the time of closing and

then hold onto them until they could be sold to Freddie Mac. (FRR at p. 14, ¶ 22.). This is where

Colonial came in. Colonial was key to TBW’s financing needs, serving as TBW’s primary

source of funding through a number of different funding arrangements. (Dkt. No. 20 at ¶¶ 18 and

44.) In particular, Colonial provided funding through various mortgage participation 6 agreements

that the parties refer to as the “COLB Facilities.” (Id. at ¶ 43.). Under the terms of the COLB

Facilities, Colonial purchased from TBW a 99% participation interest in each loan that TBW

originated; TBW retained a 1% participation interest in the loan. (See Dkt. No. 25 at ¶ 11; FRR

at p.15, ¶ 24; Dkt. No. 20 at ¶ 43.). The parties refer to these loans as the “Participated Mortgage

Loans.” (Dkt. No. 25 at ¶ 11.).

As the United States’ housing market began to show signs of weakness and TBW’s

sources of credit dried up, TBW sought additional sources of funding with which to originate and

fund mortgages. (Id. at ¶ 13.). To that end, TBW created Ocala in 2005. (Id. at ¶ 14; FRR at pp.

53-54, ¶¶ 103-104.). TBW controlled Ocala and, as a practical matter, was fully responsible for

all of Ocala’s business activities. (Dkt. No. 20 at ¶ 53; FRR at p. 53, ¶ 103.).

TBW created Ocala to function as a conduit through which TBW could obtain funding

from outside investors. (Dkt. No. 25 at ¶ 15; FRR at pp. 53-54, ¶ 104; Dkt. No. 20 at ¶ 49.).

Ocala funded its operations by issuing short-term liquidity notes (the “Ocala Notes”) that were

supposed to be secured at all times by Participated Mortgage Loans that Ocala owned and/or the

cash proceeds of the sale of these Loans to Freddie Mac. (Dkt. No. 25 at ¶¶ 15-19; Dkt. No. 20 at

¶¶ 50-51; FRR at p. 53-54, ¶ 104.). At the time of TBW’s collapse, DB and BNP were the only

6 A “mortgage participation” is a mortgage or pool of mortgages that is divided into units that are sold to one or more investors, each of whom participates in receiving payments of principal and interest. See http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea10.shtm.

7 holders of Ocala Notes. DB owned $1.2 billion of the Notes; BNP owned $480.7 million. (Dkt.

No. 20 at ¶ 52; Dkt. No. 25 at ¶ 19.).

TBW arranged for Ocala to purchase Colonial’s 99% participation interest in each

Participated Mortgage Loan that TBW funded through the Colonial COLB Facilities. (Dkt. No.

20 at ¶ 60; Dkt. No. 25 at ¶16.). By arranging for Ocala to purchase Colonial’s 99% interest,

TBW effectively paid back Colonial, which, in turn, freed up more funding for TBW to use from

the COLB Facilities. (Dkt. No. 25 at ¶ 16.). Once Ocala owned the Loans, TBW arranged for the

Loans to be sold to Freddie Mac. (Id. at ¶ 17.). TBW would cause the proceeds from the Freddie

Mac sale to either be applied to the balance outstanding on the Ocala Notes or to cause Ocala to

buy more Participated Mortgage Loans from Colonial. Id.

BOA had several distinct but related roles in the above-described arrangement. First,

TBW and Colonial needed a custodian to hold the Participated Mortgage Loans pending Ocala’s

purchase of Colonial’s interest in the Loans. To that end, in July 2008, Colonial, TBW, and BOA

entered into a contract entitled “Custodial Agreement.” (Dkt. No. 25 at ¶ 22.). The provisions of

the Custodial Agreement are set forth in greater detail herein at Section IV.D., but generally

under this Agreement, BOA agreed to accept the Participated Mortgage Loans, hold them for the

benefit of Colonial and TBW (to the extent of each entities’ participation interest in the Loans),

and either return the Loans to Colonial or remit payment to Colonial once the Loans were sold to

Ocala. (Id. at ¶¶ 22-23.). BOA was paid a fee for these services. (Id. at ¶ 34.).

BOA asserts that the Custodial Agreement is the only agreement that governed this

transfer of Loans. (Dkt. No. 36, BOA’s Reply in support of its Motion to Dismiss, at 22.). The

FDIC asserts that Colonial transmitted the Loans to BOA via bailee letters (the “Bailee

Letter(s)”) and that the Bailee Letters either modified the Custodial Agreement or constituted

8 new, independent agreements between Colonial and BOA. (Dkt. No. 41, the FDIC’s Opp. to

BOA’s Motion to Dismiss, at 10.). It is pursuant to these agreements that the FDIC brings its

Counterclaims.

BOA also agreed to act as the Indenture Trustee, Custodian and Collateral Agent for the

Ocala Facility. (Dkt. No. 20 at ¶ 10.). This agreement is reflected in a set of agreements that the

parties refer to as the “Ocala Facility Documents.” (Id. at ¶¶ 53-54.). Three of these agreements

are particularly relevant to this dispute, each dated June 30, 2008: (1) the Security Agreement,

(2) the Purchase Agreement, and (3) the Base Indenture. The provisions of these agreements are

discussed in detail herein at Section IV.C., but generally under these agreements, BOA agreed to

administer and regulate the flow of mortgages and cash in and out of Ocala, certify the solvency

of Ocala prior to its issuance of Ocala Notes, and, upon certain events of default, shut down

Ocala and take other specific actions. BOA was paid a fee for these services. 7

D. Factual Allegations Specific to BOA’s Claims Against the FDIC

When TBW collapsed in August 2009, the parties discovered that the value of the

collateral backing the Ocala Notes was grossly overstated. (Dkt. No. 20 at ¶ 1.). When the dust

finally settled, Ocala owed DB and BNP approximately $1.7 billion, but the value of the

mortgage loans backing the Ocala Notes coupled with Ocala’s cash on deposit was less than

$200 million. (Id.; FRR at p. 63, ¶ 119.). BOA, in its capacity as Indenture Trustee, Custodian,

and Collateral Agent under the Ocala Facility Documents, seeks to recover the amounts owed on

the Ocala Notes from the FDIC as the Receiver for Colonial and Platinum. (Dkt. No. 20 at ¶ 1.).

The substance of BOA’s claims is that Colonial and Platinum were parties to TBW’s fraudulent

7 BOA’s role as the Custodian for TBW and Colonial, as well as its role as the Indenture Trustee, Collateral Agent, and Custodian under the Ocala Facility Documents is also the subject of a pending case in the Southern District of New York. See BNP Paribas Mortgage Corporation v. Bank of America, N.A., 778 F. Supp. 2d 375 (S.D.N.Y. 2011).

9 scheme that resulted in the loss of billions of dollars belonging to Ocala. (Dkt. No. 35, BOA’s

Opp. to the FDIC’s Motion to Dismiss, at 1; Dkt. No. 20 at ¶¶ 1, 64-68, 106.).

Specifically, BOA alleges that when TBW began to experience significant liquidity

problems in 2002, TBW and Colonial conspired to cover the cash shortfalls in TBW’s master

bank account (the “Master Account”) by “sweeping” money from other TBW accounts at

Colonial into the Master Account. (Dkt. No. 20 at ¶ 65a.). This gave the false appearance that the

Master Account was not overdrawn. (Id.). The day after the funds were swept into the Master

Account, TBW and Colonial swept the same funds back out of the Account. (Id.). BOA asserts

that TBW and Colonial continued to disguise the Master Account’s growing deficit by creating

false mortgage loan data to give the impression that Colonial had purchased ownership interest in

certain of TBW’s loans. (Id. at ¶ 65b.). BOA claims that Colonial knew that this data included

loans that either did not exist or that TBW had already committed or sold to outside investors

(i.e., Freddie Mac). (Id.). BOA alleges that during this same time, “billions of dollars” were

transferred from Ocala accounts to a TBW account at Colonial for the purpose of purchasing

mortgages. (Id. at ¶ 68.). However, BOA alleges, some of the funds were not actually used to

purchase mortgages, or were used to purchase “sham” mortgages, and therefore, the transfers,

were in fact, a theft of Ocala’s assets. (Id.). Finally, BOA claims that TBW, Colonial, and

Platinum diverted $50 million from Ocala to an escrow account at Platinum as part of their effort

to fraudulently obtain TARP funds. (Id. at ¶ 74.).

BOA maintains that TBW and the banks concealed the above-described fraudulent

diversions from BOA and Ocala’s investors by, among other things, providing BOA with

falsified collateral lists that misrepresented the status of loans in which Ocala allegedly held a

10 security interest. (Id. at ¶ 65i.). According to BOA, these falsified collateral lists misrepresented

the ownership status of loans allegedly held by Ocala by more than $1 billion. (Id.).

BOA asserts that the combined effect of the above-described fraudulent activities was

that TBW, Colonial and Platinum fraudulently diverted virtually all of Ocala’s assets, leaving it

unable to pay its obligations when the fraud was uncovered. (Dkt. No. 20 at ¶ 1.). In bringing this

action, BOA seeks to recover Ocala’s losses from Colonial and Platinum for the benefit of Ocala,

Ocala’s investors (i.e., DB and BNP), and BOA itself. BOA maintains that it is entitled to bring

such claims and, indeed, is obligated to bring the claims as Indenture Trustee, Custodian, and

Collateral Agent under the Ocala Facility Documents. (Dkt. No. 20 at ¶¶ 8-10; Dkt. No. 35 at 8.).

According to BOA, it is pursuant to these obligations that BOA commenced suit in the

United States District Court for the Southern District of Florida against Colonial to recover

mortgages and other assets allegedly belonging to Ocala. (Id. at ¶¶ 102, 104.). The Eleventh

Circuit dismissed the case, stating that BOA had to proceed through the statutory administrative

claims process created by Congress for distressed financial institutions. (See Dkt. No. 35 at 9

(citing Bank of Am. N.A. v. Colonial Bank, 604 F.3d 1239, 1241 (2010)).). Therefore, on

November 19, 2009 and December 9, 2009, BOA filed proofs of claim with the FDIC (as the

Receiver for Colonial and Platinum), seeking allowance of general unsecured claims against

Colonial and Platinum, respectively, for the losses suffered by Ocala and its investors (i.e., DB

and BNP). (Id. at ¶¶ 123-124 and 137-138.).

The parties dispute on whose behalf BOA filed the proofs of claim. BOA asserts that it

filed the claims on behalf of Ocala, Ocala’s investors (i.e., DB and BNP) and itself. (See Dkt.

No. 35 at 16.). The FDIC counters that the claims were only filed on behalf of DB and BNP. (See

Dkt. No. 26, the FDIC’s Motion to Dismiss, at 9.). On August 4, 2010, the FDIC disallowed the

11 claim against Colonial. (Dkt. No. 20 at ¶ 130.). Similarly, on August 5, 2010, the FDIC

disallowed the claim against Platinum. (Id. at 144.). BOA filed the present action seeking a de

novo review of the FDIC’s denial of the receivership claims (Counts I through IV). (Id. at ¶ 10.).

BOA also alleges claims for fraud (Count V), civil conspiracy (Count VI), unjust enrichment

(Count VII), conversion (Count VIII), and actual and constructive fraudulent transfer (Counts IX

and X). (Id. at ¶¶ 169-234.).

E. Factual Allegations Specific to the FDIC’s Counterclaims Against BOA

The FDIC concedes that Colonial employees were involved in aspects of TBW’s

fraudulent scheme. (Dkt. No. 41 at 4.). However, it claims that these employees were not

involved in any wrongful actions with respect to Ocala. (Id.). Instead, the FDIC maintains that

Ocala’s inability to pay back the Ocala Notes was due to a facet of TBW’s scheme of which

Colonial was unaware, and that TBW was only able to pull off because BOA breached its

obligations to Colonial. (Dkt. No. 25 at ¶¶ 1-8.).

The FDIC alleges that in July 2008, Colonial, TBW, and BOA entered into the Custodial

Agreement. (Id. at ¶ 22.). The stated purpose of the Custodial Agreement was to govern the

transfer of the Participated Mortgage Loans from TBW to Colonial pursuant to the mortgage

participation agreement under the Colonial COLB Facilities. (See Custodial Agreement at

Recitals attached as Ex. A to Dkt. No. 36-1, Declaration of Kristin Linsley Myles (the “Myles

Decl.”). Under the Agreement, BOA “agreed to act on behalf of [Colonial] and [TBW]…as

[Colonial’s] and [TBW’s] agent and bailee (to the extent of their respective ownership interests

in Participated Mortgage Loans) for purposes of holding the [documents] related to the

Participated Mortgage Loans…”. (Id.). The FDIC also asserts that Colonial routinely transferred

the Participated Mortgage Loans and associated documents to BOA under cover of a standard

12 bailee letter (the “Bailee Letters”), utilizing the letter as a Loan Transmittal Sheet. (Dkt. No. 25

at ¶ 31; see also a copy of a Bailee Letter attached as Ex. B to Dkt. No. 36-1, Myles Dec.).

The FDIC claims that the Custodial Agreement and Bailee Letters, together and

separately, establish that BOA was Colonial’s agent and bailee, placing certain obligations on

BOA. (Dkt. No. 25 at ¶¶ 24-25.). Among other things, BOA was obliged to hold the Participated

Mortgage Loans for Colonial’s exclusive use and benefit and for the purpose of perfecting

Colonial’s ownership in the Loans until Colonial was paid for their sale. (Id.). The FDIC alleges

that BOA breached these obligations in the following manner.

The FDIC claims that at some point beginning around June 2008, TBW started notifying

BOA that Ocala had “purchased” certain Participated Mortgage Loans from the Colonial COLB

Facilities, but would never instruct BOA to pay Colonial for the Loans that Ocala allegedly

purchased. (Id. at ¶ 43.). 8 Instead, BOA would receive the Loans from TBW and enter them into

its collateral management system as collateral for DB and BNP without first paying Colonial.

(Id.). Next, BOA would assist Ocala in selling the Loans to Freddie Mac. (Id.). The FDIC asserts

that BOA would accomplish this by falsifying Freddie Mac Form 996E forms entitled

“Warehouse Lender Release of Security Interest,” on which BOA would state that it was the

“Warehouse Lender,” that TBW was the “Seller,” and that there were no other encumbrances on

the Loans. (Id. at ¶ 44.).

The FDIC claims that after Freddie Mac paid Ocala for the Loans, TBW would instruct

BOA to forward the sales proceeds to Colonial. (Id. at ¶ 45.). However, the sales proceeds were

not used to pay Colonial for the Loans that were just sold to Freddie Mac; instead, the FDIC

alleges, TBW directed BOA to pay Colonial for Loans that had been shipped to BOA earlier and

8 If Ocala was operating as it was supposed to, TBW’s notification of the purchase should have been accompanied by a corresponding request that BOA transfer the sales proceeds to Colonial. (FRR at ¶ 117a.).

13 that had already been sold by Ocala to Freddie Mac in the intervening time. (Id.). In effect, the

new sales proceeds were used to pay Colonial for its prior sales to Ocala. Thus, Ocala was never

current on the amount that it owed Colonial. The FDIC asserts that a substantial number of these

Loans were listed as collateral under the Colonial COLB Facilities even though Colonial was not

paid for the Loans at the time of Ocala’s “purchase” of the Loans. (Id.). The FDIC asserts that

the net effect of this course of conduct was that thousands of Participated Mortgage Loans were

sold to Freddie Mac but remained listed in BOA’s system as collateral for the Ocala Notes. (Id.

at ¶¶ 45-49).

The FDIC asserts that the above-described process was unknown to Colonial at the time

because Colonial still typically received payment for the Loans within the appropriate amount of

time under the Bailee Letters. (Id. at 46.). However, when TBW collapsed in August 2009, the

process described above came to an abrupt halt. (Id.). At that time, Colonial, DB/BNP, and

Freddie Mac each believed that they owned the same 4,205 Participated Mortgage Loans, and

Colonial and Freddie Mac believed that they owned an additional 603 Loans. (Dkt. No. 25 at ¶

48.). In other words, according to the FDIC, in August 2009, BOA was obligated to Colonial for

4,808 Participated Mortgage Loans with a total value of $900 million. (Id. at ¶ 49.). The FDIC

filed sixteen Counterclaims alleging breach of contract, bailment, fiduciary duties, and common

law bailment with respect to these 4,808 Participated Mortgage Loans. (Id. at ¶¶ 67-154.).

III. PROCEDURAL HISTORY

BOA commenced this action on October 1, 2010. (Dkt. No. 1.). The FDIC moved to

dismiss the Complaint on March 14, 2011. (Dkt. No. 16.). In response, BOA moved to amend

the Complaint pursuant to 12 U.S.C. § 1821(d)(6)(A)(ii), which the Court granted on April 11,

14 2011. (Dkt. Nos. 19-20; Minute Entry dated April 11, 2011.). The FDIC filed the present motion

to dismiss, and also filed an Answer and Counterclaims. (Dkt. Nos. 25 and 36.).

On October 24, 2011, BOA moved to dismiss the FDIC’s Counterclaims pursuant to Rule

12(b)(6), claiming that each Counterclaim fails as a matter of law. (Dkt. No. 37.). The case was

reassigned to this District Court Judge on January 27, 2012. (Dkt. No. 42.). Thereafter, BOA

filed a motion before the Judicial Panel on Multidistrict Litigation to transfer this case to the

Southern District of New York. In Re Ocala Funding, LLC, ___ F. Supp. 2d ___, 2012 WL

2089209 (US. Jud. Pan. Mult. Lit. June 8, 2012). On March 20, 2012, this Court stayed the case

pending the Panel’s resolution of the motion. (Minute Entry dated March 20, 2012.). On June 18,

2012, the parties notified the Court that the Panel denied BOA’s motion to transfer the case, and

the Court lifted the stay. (Minute Entry dated June 18, 2012.).

The Court heard oral arguments on the cross motions to dismiss on October 2, 2012.

(Minute Entry dated October 2, 2012.). The motions are now ripe for review.

IV. DISCUSSION

A. Standards of Review

1. The Standard of Review for 12(b)(1) Motions

The FDIC moves to dismiss the Amended Complaint pursuant to Federal Rule of Civil

Procedure 12(b)(1). When a party files a motion to dismiss for lack of subject matter jurisdiction

under Rule 12(b)(1), “the plaintiff[ ] bear[s] the burden of proving by a preponderance of the

evidence that the Court has subject matter jurisdiction.” Biton v. Palestinian Interim Self-Gov’t

Auth., 310 F. Supp. 2d 172, 176 (D.D.C. 2004). Because subject matter jurisdiction focuses on a

court’s power to hear the plaintiff’s claim, a Rule 12(b)(1) motion imposes on the court an

affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority.

15 Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13 (D.D.C. 2001). For

this reason, BOA’s “‘factual allegations in the complaint…will bear closer scrutiny in resolving

[the] 12(b)(1) motion’ than in resolving [the] 12(b)(6) motion for failure to state a claim.” Id. at

13-14 (quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure §

1350 (2d ed. 1987) (alternation in original)).

In deciding the Rule 12(b)(1) motion, this Court need not limit itself to the allegations of

the Amended Complaint. See Hohri v. United States, 782 F.2d 227, 241 (D.C. Cir. 1986, vacated

on other grounds, 482 U.S. 64 (1987). Rather, this Court may “consider such materials outside

the pleadings as it deems appropriate to resolve the question whether it has jurisdiction in the

case.” Scolaro v. D.C. Board of Elections and Ethics, 104 F. Supp. 2d 18, 22 (D.D.C. 2000)

(citing Herbert v. Nat’l Acad. of Scis, 974 F.2d 192, 197 (D.C. Cir. 1992); see also Venetian

Casino Resort, L.L.C. v. E.E.O.C., 409 F.3d 359, 366 (D.C. Cir. 2005) (“given the present

posture of this case—a dismissal under Rule 12(b)(1) on ripeness grounds—the court may

consider materials outside the pleadings”).

2. The Standard of Review for 12(b)(6) Motions

The FDIC and BOA both move to dismiss pursuant to Federal Rule of Civil Procedure

12(b)(6). To survive a motion to dismiss under Rule 12(b)(6), “a complaint 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) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556

(2007)) (internal quotes omitted)). This Court must construe the operative pleading in the light

most favorable to the pleader and must accept as true all reasonable factual inferences drawn

from well-pleaded factual allegations. Aktieselskabet AF 21 November 2001 v. Fame Jeans Inc.,

525 F.3d 8, 15 (D.C. Cir. 2008). This Court need not, however, “accept inferences drawn by

16 [pleaders] if such inferences are unsupported by the facts set out in the [operative pleading]. Nor

must the [C]ourt accept legal conclusions cast in the form of factual allegations.” Kowal v. MCI

Commc’ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994).

If the well-pleaded facts do not permit the Court, drawing on its judicial experience and

common sense, to infer more than the “mere possibility of misconduct,” then the operative

pleading has not shown that the pleader is entitled to relief. Iqbal, 556 U.S. at 679 (citing Fed. R.

Civ. P. 8 (a)(2)). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks

for more than a sheer possibility that [the movant] has acted unlawfully.” Id. at 678 (citation

omitted). “Where a complaint pleads facts that are merely consistent with [the movant’s]

liability, it stops short of the line between possibility and plausibility of entitlement to relief.”

Ashcroft, 556 U.S. at 678 (internal citation and quotation marks omitted).

In addition, because this Court’s review of the Rule 12(b)(6) motions is based upon

consideration of the allegations contained in the operative pleadings, the Court will not consider

extraneous documents, except under limited circumstances. See generally Hinton v. Corr. Corp.

of Am., 624 F. Supp. 2d 45, 46 (D.D.C. 2009). For instance, this Court may consider documents

attached to the Amended Complaint and/or Counterclaims, Stewart v. Nat’l Educ. Ass’n, 471

F.3d 169, 173 (D.C. Cir. 2006), or referred to in the Amended Complaint and/or Counterclaims

if the documents are central to the claims and the parties do not dispute the documents’

authenticity, Kaempe v. Myers, 367 F.3d 958, 965 (D.C. Cir. 2004). Here BOA and the FDIC

refer the Court to a number of documents that are central to their respective claims, the

authenticity of which is not contested. Accordingly, the Court has considered these documents

in resolving these motions.

17 B. The FDIC’s Motion to Dismiss the Amended Complaint

The FDIC and BOA each move to dismiss their counterparts’ claims in their entirety. The

Court will address the FDIC’s motion first. The FDIC moves to dismiss the Amended Complaint

pursuant to Federal Rule 12(b)(1) for failure to exhaust administrative remedies under the

Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) and for lack

of standing. (See Dkt. No. 26, at 2-3.). The FDIC also asserts, again pursuant to FIRREA, that

this Court lacks subject matter jurisdiction over the three equitable claims (Counts II, IV, and

VII). (Id. at 4.).

In the alternative, the FDIC seeks to dismiss Counts V (Fraud), IX (Actual Fraudulent

Transfer), and X (Constructive Fraudulent Transfer) for failure to state a claim upon which relief

can be granted. (Id.). The FDIC contends that the Amended Complaint does not allege several of

the material elements necessary to state a claim for actual and/or constructive fraudulent transfer,

and does not assert factual allegations sufficient to establish entitlement to relief. (Id.) The FDIC

also alleges that the fraud claim does not meet the heightened pleading requirements of Federal

Rule 9(b). (Id.). The Court addresses each argument in turn.

1. Whether This Court Has Subject Matter Jurisdiction over BOA’s Claims

Federal courts are courts of limited jurisdiction and have subject matter jurisdiction only

to the extent that it is conferred by statute or the Constitution. See Kokkonen v. Guardian Life

Ins. Co. of Am., 511 U.S. 375, 377 (1994); see also Gen. Motors Corp. v. Envtl. Prot. Agency,

363 F.3d 442, 448 (D.C. Cir. 2004) (noting that “[a]s a court of limited jurisdiction, we begin,

and end, with an examination of our jurisdiction”). The claimant bears the burden of establishing

by a preponderance of the evidence that a court has jurisdiction; failure to do so is fatal to the

claim. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992); Kokkonen, 511 U.S. at 377. A

18 court must dismiss a complaint for lack of subject matter jurisdiction where “it appears beyond

doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him

to relief.” Bobreski v. U.S. E.P.A., 284 F. Supp. 2d 67, 72 (D.D.C. 2003) (quoting Empagran S.A.

v. F. Hoffman-LaRoche, Ltd., 315 F.3d 338, 343 (D.C. Cir. 2003)). A court may consider

relevant materials outside the pleadings to determine whether it has jurisdiction. Wilson v.

District of Columbia, 269 F.R.D. 8, 11 (D.D.C. 2010).

The FDIC contends that this Court does not have subject matter jurisdiction over the

claims asserted in the Amended Complaint for the following three reasons. First, to the extent

that BOA seeks to recover damages allegedly incurred by Ocala, this Court is without

jurisdiction because Ocala has not exhausted its administrative remedies under FIRREA. Second,

to the extent that BOA seeks to recover damages allegedly incurred by DB and BNP, this Court

is without jurisdiction because DB’s and BNP’s injuries are derivative of Ocala’s injuries and, as

such, cannot confer Article III standing. Third, the FDIC argues that Counts VI (Civil

Conspiracy), IX (Actual Fraudulent Transfer) and X (Constructive Fraudulent Transfer) have not

been exhausted under FIRREA. 9

a. Whether BOA Exhausted the Administrative Remedies under FIRREA on behalf of Ocala

In enacting FIRREA, Congress created a comprehensive statutory scheme under which it

granted the FDIC the authority to act as the Receiver for a failed financial institution. The “core

purpose" of FIRREA is to “ensure that the assets of a failed institution are distributed fairly and

promptly among those with valid claims against the institution.” Freeman v. FDIC, 56 F.3d 9 The FDIC also contends that this Court does not have subject matter jurisdiction over the three equitable claims (Counts II, IV and VII) pursuant to FIRREA. BOA did not dispute this claim in its opposition to the FDIC’s motion. Accordingly, the Court deems the argument conceded and will grant the FDIC’s motion to dismiss as to Counts II, IV and VII. See Bancoult v. McNamara, 227 F.Supp.2d 144, 149 (D.D.C.2002) (“if the opposing party files a responsive memorandum, but fails to address certain arguments made by the moving party, the court may treat those arguments as conceded”); accord Day v. D.C. Dep't of Consumer & Regulatory Affairs, 191 F.Supp.2d 154, 159 (D.D.C.2002).

19 1394, 1401 (D.C. Cir. 1995). Congress intended to grant the FDIC the “power to take all actions

necessary to resolve problems posed by financial institutions in default” in an “expeditious

manner.” H.R. Rep. No. 101-54(I) at 322, 330, as reprinted in 1989 U.S.C.C.A.N. 86, 118, 126.

To that end, Congress created a statutory procedure for the orderly and efficient processing of

claims against failed financial institutions. This administrative claims process, set forth in 12

U.S.C. §§ 1821(d)(3) through (13), centralizes the initial consideration and resolution of claims

by requiring that all claims be submitted to the Receiver by the “claims bar date,” a date certain

established by the Receiver. Once a timely administrative claim is submitted, the Receiver has

180 days to determine whether to approve or disallow the claim. Id. § 1821(d)(5)(A)(i). The

Receiver may disallow any portion of a timely claim that is not proven to the Receiver’s

satisfaction. Id. §§ 1821(d)(5)(C), 1821(d)(5)(D). Section 1821(d)(6)(A) also establishes that a

claimant can file a new suit, or continue a pre-existing suit, on a claim within 60 days after the

earlier of (i) the Receiver’s initial determination of a claim, or (ii) termination of the 180-day

period in which the Receiver may determine the claim. In such a suit, the court performs a de

novo judicial determination of the claim. Id. §§ 1821(d)(5)(A)7(E).

The administrative claims process is mandatory. Thus, in Section 1821(d)(13)(D),

Congress withdrew jurisdiction from all courts to hear claims against the FDIC as Receiver,

except as granted elsewhere in Section 1821(d). See Freeman, 56 F.3d at 1399-1400. The

jurisdictional bar provision and the claims procedures work together to impose a “statutory

exhaustion requirement” that is “explicitly jurisdictional.” Rosa v. RTC, 938 F.2d 383, 395 (3d

Cir. 1991), cert. denied, 502 U.S. 981 (1991); see Freeman, 56 F.3d at 1400 (“Section

1821(d)(13)(D) thus acts as a jurisdictional bar to claims or actions by parties who have not

exhausted their § 1821(d) administrative remedies.”). This Circuit recognizes that

20 “[j]urisdictional provisions in federal statutes are [] strictly construed.” Hardin v. City Title &

Escrow Co., 797 F.2d 1037, 1040 (D.C. Cir. 1986); Freeman, 56 F.3d at 1400 (strictly applying

Sections 1821(d)(6) and (13)(D) to dismiss claims for lack of jurisdiction); see Office & Prof’l

Emps. Int’l Union, Local 2 v. FDIC, 962 F.2d 63, 66 (D.C. Cir. 1992) (“FIRREA…preclude[s]

suit on a claim that was not first presented to the Receiver.”); see also, Brady Dev. Co. v. RTC,

14 F.3d 998, 1007 (4th Cir. 1994) (“The administrative prerequisite to suit set forth [FIRREA]

has been strictly construed and is considered an absolute and unwaivable jurisdictional

requirement….”) (internal quotation marks and brackets omitted).

In the suit at hand, BOA purports to assert claims on behalf of Ocala. The FDIC moves to

dismiss these claims, arguing that neither Ocala, nor BOA on Ocala’s behalf, filed an

administrative claim with the FDIC, as is required to confer jurisdiction upon this Court. The

FDIC asserts that while BOA contends that it filed administrative claims on behalf of Ocala (i.e.,

the November 19 and December 19, 2009 proofs of claim referenced above in Section II.D.), the

claims themselves reveal that they were actually filed on behalf of DB, BNP, and BOA. In

support of its argument, the FDIC points to the cover page for each proof of claim on which

“claimant” is identified as “BOA as Trustee (as defined in Exhibit A hereto).” (Dkt. No. 20 at

Exs. A and C.). Exhibit A, in turn, states that the claim is submitted “on behalf of the Secured

Parties, as defined in the [Ocala Facility Documents].” (Id.). The FDIC asserts that Ocala is not

included in the definition of “Secured Parties” under the Ocala Facility Documents. Rather,

Ocala is listed as the “Issuer.” (Id.). The FDIC also maintains that the proofs of claim do not

allege damages to Ocala. Instead, the claims only seek recovery for losses allegedly incurred by

the Secured Parties. Therefore, the FDIC concludes, the proofs of claim cannot reasonably be

read as asserting a claim on behalf of Ocala.

21 BOA counters that it filed the proofs of claim as a “representative” of Ocala, thereby

exhausting Ocala’s administrative remedies. BOA asserts that the proofs of claim expressly state

that Ocala had granted BOA a security interest in all of Ocala’s assets and that BOA was

pursuing the claims with the receivership to vindicate BOA’s security interest. According to

BOA, this representative status is expressly recognized in the definition of “Secured Parties.”

BOA further asserts that the FDIC had abundant notice not only of the nature of the claims

asserted by BOA, but also of the specific relationships among the various Ocala parties and the

representative capacity in which BOA was filing the proofs of claim.

BOA also maintains that courts take a “lenient” view in determining whether a claim

constitutes notice under FIRREA. According to BOA, neither FIRREA nor the FDIC regulations

define the precise form in which a claim must be presented in order to satisfy the administrative

exhaustion requirement. (Dkt. No. 35, at 13 (citing FDIC v. Lacentra Trucking, Inc., 157 F.3d

1292, 1304 (11th Cir. 1998); Branch v. FDIC, 833 F. Supp. 56, 59 (D. Mass. 1996).). In light of

this absence of statutory definition, BOA argues, the D.C. Circuit has construed the term “claim”

liberally and used broad latitude in determining whether the claimant has adequately presented a

claim in the administrative process. (Id. at 14 (citing Branch, 833 F. Supp. at 60 (“an

administrative claim is sufficient if it provides the government with notice of the general nature

of the claim and with sufficient information to allow it to investigate and determine whether

settlement of the claim is appropriate”)).). Given this “flexible” standard for reviewing claims,

BOA argues, the FDIC had enough notice of Ocala’s potential claims to satisfy the FIRREA’s

exhaustion requirement. (Id.).

The Court disagrees. A careful reading of the proofs of claim shows that BOA filed the

claims on its own behalf and that of DB and BNP—not Ocala. BOA submitted the claims on a

22 standard “proof of claim” form that is available at the FDIC’s website. (Dkt. No. 35 at 13 fn. 3.).

In the section of the form left blank for the name of the debtee, BOA entered “Bank of America,

National Association, as Trustee (as defined in Exhibit A hereto).” 10 (Dkt. No. 20, Ex. A at 1.).

On the section of the form that requests information on whose behalf the claim is filed, BOA

entered: “the Trustee for the [S]ecured [P]arties on the Ocala Funding, LLC Short Term and

Subordinate Notes.” (Id.) (emphasis added.). BOA again reiterated that it submitted the claims

on behalf of itself and the Secured Parties in a footnote to the proof of claim: “The tax ID

number shown is for [BOA]. Many of the claims described in this proof of claim, however, are

made by [BOA] in its capacity as Trustee on behalf of the [S]ecured [P]arties with respect to the

Ocala Funding, LLC Short Term and Subordinate Notes.” (Id. at 1 fn. 1) (emphasis added).

Exhibit A, which is attached to each proof of claim, describes the nature and basis of each

claim in more detail. (Dkt. No. 20, Exs. A and C.). In the first paragraph of Exhibit A, BOA

explains that it is the “indenture trustee, collateral agent and custodian” with respect to the Ocala

Notes. (Id. at Ex. A and C to FAC, Ex. A at ¶ 1.). BOA then states that it is acting “on behalf of

the Secured Parties, as defined in the [Ocala Facility Documents]…” and further states that it

submits “Exhibit A to its proof of claim…on behalf of the Secured Parties.” (Ex. A and C to

FAC, Ex. A at ¶ 2) (emphasis added). Finally, BOA states that it filed the receivership claims in

order “to preserve its rights and the rights of the [S]ecured [P]arties on whose behalf it is

making the claims set forth in this proof of claim.” (Id. at ¶ 17) (emphasis added).

The Ocala Facility Documents, in turn, define “Secured Parties” as “…each Swap

Counterparty, the Indenture Trustee, the Collateral Agent, the Series 2005-I Depository, the

Series 2008-I Depository, the holders of the Short Term Notes, the holders of the Term Notes,

10 Cynthia A. Grim, Senior Vice President for BOA, is listed as the “person making the claim.” (Dkt. No. 20, Ex. A.).

23 the holders of the Subordinated Notes, the holders of the Extended Notes and the holders of the

Non-Called Notes (such Persons, collectively the ‘Secured Parties and each a ‘Secured Party’).”

(See Dkt. No. 39, Ex. B the Security Agreement at fourth WHEREAS clause; see also Dkt. No.

39 Ex. C Schedule I to the Base Indenture Agreement, at p. 31 (using the same definition for the

term “Secured Parties”).). On the other hand, the Facility Documents list Ocala as the “Issuer”

under the agreements. Therefore, by stating that it is submitting the receivership claims as the

“Trustee for the Secured Parties” and that is acting “on behalf of the Secured Parties,” BOA, by

definition, is not acting on behalf of Ocala.

Nevertheless, BOA argues that, read as a whole, the proofs of claim clearly indicate that

it seeks to recover for “losses incurred by the Ocala [F]acility itself, including losses incurred by

all investors in the Ocala [F]acility and by BOA itself.” (Dkt. No. 35 at 18) (emphasis in

original). According to BOA, “[b]y bringing claims ‘on the Ocala Funding, LLC Short Term and

Subordinate Notes,’ see Exs. A & C at 1, and pursuant to the security interest granted to it by

Ocala in Ocala’s assets, see id. at ¶ 3, BOA necessarily sought an administrative remedy for

Ocala and all parties with interest in the Ocala assets, including Ocala’s investors and BOA

itself.” (Id.) (emphasis in original).

The Court is not persuaded. A common sense reading of the proofs of claim shows that

they were filed on behalf of entities other than Ocala. Nowhere in the claims does BOA state that

it is acting on behalf of Ocala. Instead, the claims repeatedly state that they are being made for,

or on behalf of, BOA and the Secured Parties (i.e., DB and BNP). Indeed, in every instance

where the claims mention Ocala’s alleged property, it is clear that BOA seeks to recover the

property for itself and DB and BNP and not for the benefit of Ocala. (See, e.g., Dkt. No. 20, Exs.

A and C, Ex. A at ¶ 5(i)-(ii) (asserting a claim to all Ocala property to which the “Trustee has a

24 security interest” and to which “the Trustee is entitled to be paid in full before other creditors of

Colonial Bank”).). In short, regardless of BOA’s right under the Ocala Facility Documents to

exhaust Ocala’s administrative remedies, BOA failed to do so.

Nor is the Court persuaded that it must apply a lenient standard in determining whether

the proofs of claim were sufficient to exhaust Ocala’s administrative remedies. The cases on

which BOA relies for this proposition are inapposite and contrary to the law of this Circuit. For

instance, the first case on which BOA relies, Office & Prof’l Emps. Inter’l Union v. FDIC, 962

F.2d 63 (D.C. Cir. 1992), stands only for the proposition that a representative can make an

administrative claim on behalf of another and that such claim will be sufficient to exhaust the

administrative remedies of the represented entity. The FDIC has not argued that BOA cannot

make an administrative claim on behalf of Ocala; rather, the FDIC argues that BOA failed to

make such a claim. Lacentra Trucking, Inc., is equally inapplicable. In that case, the plaintiff

never filed an administrative claim and was absolved by the court of doing so by the Receiver’s

decision to litigate. FDIC v. Lacentra Trucking, Inc., 157 F.3d 1292 (11th Cir. 1998). That is not

the case here. Finally, the third case on which BOA relies, Branch v. FDIC, is no longer good

law. 833 F. Supp. 56 (D. Mass. 1993). Branch takes the position that statutory limitations on

federal court jurisdiction “are to be construed narrowly,” citing Heno v. FDIC, 996 F.2d 429, 435

(1st Cir. 1993) withdrawn and substituted on reh’g by 20 F.3d 1204 (1st Cir. 1994) for this

proposition. See Branch, at 60. However, in a subsequent ruling, the First Circuit withdrew the

opinion upon which Branch relied, and replaced it with an opinion which does not include the

language cited in Branch. See Heno v. FDIC, 20 F.3d 1204 at 1205.

Next BOA argues that even if the proofs of claim were not sufficient to place the FDIC

on notice that BOA was bringing a claim on behalf of Ocala, its pre-receivership suit against

25 Colonial filed in the Southern District of Florida was sufficient to place the FDIC on notice of

the claim. This argument is unavailing. The FIRREA administrative exhaustion requirement

applies to all claimants, even those that filed pre-receivership suits against failed financial

institutions. See, e.g., Marquis v. FDIC, 965 F.2d 1148, 1151 (1st Cir. 1992) (“FIRREA makes

participation in the administrative claims review process mandatory for all parties asserting

claims against failed institutions, regardless of whether a lawsuit to enforce those claims was

initiated prior to the appointment of a receiver”); Brady Development Co., Inc. v. RTC, 14 F.3d

998, 1002 (4th Cir. 1994) (“litigants who have an action pending in court against a [financial

institution] that is subsequently placed in receivership…must avail themselves of FIRREA’s

administrative process in order to continue the action”); Intercontinental Travel Mktg., Inc. v.

FDIC, 45 F.3d 1278, 1283 (9th Cir. 1994) (citing Carney v. Resolution Trust Corp., 19 F.3d 950,

955-56 (5th Cir. 1994) (the FIRREA “neither creates a separate scheme for cases pending at the

time of the FDIC’s appointment as receiver, nor allows claimants to pursue administrative and

judicial remedies simultaneously”)). 11

Finally, BOA alleges that “repeated communications” between the FDIC and BOA were

sufficient to place the FDIC on notice of Ocala’s claim. This argument is without merit. A

claimant may not exhaust its administrative remedies through communications outside of its

proof of claim. See, e.g., Brady Dev. Co., 14 F.3d at 1003 (noting that Congress sought to ensure

that all claims undergo the administrative claims process); Henderson v. Bank of New England,

986 F.2d 319, 320-21 (9th Cir. 1993) (holding that FIRREA strips all courts of jurisdiction over

claims made outside the administrative process of FIRREA); RTC v. Elman, 949 F.2d 624, 627

11 BOA’s argument is also unavailing because BOA did not sue on behalf of Ocala in the Florida case. Rather, BOA sued in its own name and, despite references to both Ocala and “certain secured parties,” BOA demanded that the property at issue be returned to BOA and that BOA be awarded damages.

26 (2d Cir. 1991) (holding that a claimant must first present its case to the RTC under the

administrative procedures erected by FIRREA before seeking relief in federal court).

Again, BOA cites to three inapposite cases in support of its theory: Plymouth Mills, Inc.

v. FDIC, 876 F. Supp. 439 (E.D.N.Y. 1995); Heno, 20 F.3d at 1205; and Hachikan v. FDIC, 914

F. Supp. 14 (D. Mass. 1996). Heno and Plymouth Mills both dealt with cases in which the

claimants’ claims came into existence after the claims bar date. In Heno, the First Circuit

approved the FDIC’s having permitted late filing by certain claimants whose claims had not

come into existence until after the bar date had passed. 20 F.3d at 1209. In Plymouth Mills, the

claimant had timely filed a proof of claim with respect to some claims, but later attempted to

supplement the claim with a letter detailing claims that allegedly occurred after the bar date. 876

F. Supp. at 441. Thus Heno and Plymouth Mills are inapplicable; BOA does not contend that

Ocala’s claims came into existence after the relevant claims bar dates. Likewise, Hachikan is

also inapplicable. In Hachikan, the claimant did not file a formal proof of claim, but did file a

detailed letter setting forth his claims. 914 F. Supp. at 16. The Hachikan court determined that

the letter was sufficient notice of a claim. Here, BOA did not submit a claim on behalf of Ocala.

Accordingly, based on the foregoing, to the extent that the Amended Complaint purports to state

claims on behalf of Ocala, those claims are dismissed.

b. Whether BOA Has Standing to Bring Claims on Behalf of DB and BNP

Next, the FDIC moves to dismiss the claims that BOA asserts on behalf of DB and BNP.

It argues that this Court does not have jurisdiction over those claims because: (1) DB and BNP

do not have Article III standing to bring the claims, and (2) BOA did not allege a basis for

bringing such claims on behalf of DB and BNP. (Dkt. No. 26 at 12-13.).

27 i. Whether DB and BNP Have Article III Standing

As the party invoking federal jurisdiction, BOA bears the burden of establishing standing.

Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992); City of Waukesha v. Envtl. Prot.

Agency, 320 F.3d 228, 233 (D.C. Cir. 2003) (per curiam). In Lujan, the Supreme Court set forth

the test for Article III standing. Sierra Club v. Envtl. Prot. Agency, 292 F.3d 895, 898 (D.C. Cir.

2002) (citing Lujan, 504 U.S. at 560). First, DB and BNP must have suffered an injury-in-fact,

defined as a harm that is concrete and actual or imminent, not conjectural or hypothetical. Byrd

v. Envtl. Prot. Agency, 174 F.3d 239, 243 (D.C. Cir. 1999) (citing Steel Co., 523 U.S. 83, 103

(1998).). Second, the injury must be fairly traceable to Colonial’s or Platinum’s alleged conduct.

Id. Finally, it must be likely that the requested relief will redress the alleged injury. Id.

This Circuit has made clear that no standing exists if the plaintiff’s allegations are “purely

speculative[, which is] the ultimate label for injuries too implausible to support standing.” Tozzi

v. Dep’t of Health & Human Servs., 271 F.3d 301, 307 (D.C. Cir. 2001). Nor does standing exist

where a court “would have to accept a number of very speculative inferences and assumptions in

any endeavor to connect the alleged injury with [the challenged conduct].” Winpisinger v.

Watson, 628 F.2d 133, 139 (D.C. Cir. 1980). However, a court must also be cognizant of the fact

that a motion to dismiss is brought during the initial stages of a case, before discovery has

commenced, thus general factual allegations of injury resulting from the defendant’s alleged

conduct will suffice to support standing. Sierra Club, 292 F.3d at 898–99.

The parties dispute whether DB and BNP suffered an “injury-in-fact” that is “fairly

traceable” to Colonial’s and Platinum’s actions. Focusing on the derivative nature of DB and

BNP’s claims, the FDIC asserts that BOA does not, and indeed, cannot, allege that DB and BNP

were directly harmed by Colonial and/or Platinum. Rather, any injury suffered by DB and BNP

28 is indistinguishable from harm sustained by Ocala, and thus too remote to confer standing. (See

Dkt. No. 26 at 12 (citing Assoc. Gen’l Contractors of Calif., Inc. v. Calif. State Council of

Carpenters, 459 U.S. 519, 532, fn. 25 (1983)).).

BOA counters that the “notion that a financial loss of nearly $1.75 billion does not

constitute [an] ‘injury-in-fact’ is absurd.” (Dkt. No. 35 at 24.). According to BOA, the injury in

fact requirement consistently has been described as a minimalist threshold and that a “massive

financial loss” of the sort suffered by DB and BNP necessarily meets this threshold. (Id. (citing

Shaffer v. Defense Intelligence Agency, 601 F. Supp. 2d 16, 23 (D.D.C. 2009).). Moreover, BOA

argues, the Amended Complaint is replete with examples of how DB and BNP’s injuries are

directly traceable to Colonial’s and/or Platinum’s fraudulent activities. (Dkt. No. 35 at 24.).

The Court concludes that BOA has alleged factual allegations sufficient to state a

plausible injury-in-fact to DB and BNP that is fairly traceable to Colonial and Platinum’s

actions. (See, e.g., Dkt. No. 20 at ¶ 2 (“TBW’s, Colonial’s, and Platinum’s fraud on the Trustee,

Ocala Funding, and the holders of beneficial interests in Ocala Funding…”) (emphasis added);

Id. at ¶ 64 (alleging that “TBW and Colonial engaged in a scheme to defraud various entities and

individuals, including investors in Ocala Funding”) (emphasis added); Id. at ¶¶ 66-68, 74, 78

(describing specific fraudulent transfers from Ocala to Colonial and Platinum); Id. at ¶¶ 1,3

(asserting that DB and BNP lost approximately $1.7 billion as a result of TBW’s, Colonial’s, and

Platinum’s action).). The standing requirement is meant to ensure that a plaintiff has a “personal

stake in the outcome of the controversy as to warrant…federal-court jurisdiction and to justify” a

court-imposed remedy. Warth v. Seldin, 422 U.S. 490, 498 (1975); Russell-Murray Hospice, Inc.

v. Sebelius, 724 F. Supp. 2d 43, 53 (D.D.C. 2010) (citing Simon v. E. Ky. Welfare Rights Org.,

426 U.S. 26, 38 (1976). BOA claims that Colonial and Platinum misappropriated the very assets

29 that secured DB’s and BNP’s investment in the Ocala Notes. As a result, DB and BNP are out

nearly $2 billion. Clearly, DB and BNP have a personal stake in whether the Ocala assets can be

recovered from the banks. If the assets can be recovered, DB and BNP stand to recoup at least a

portion of their losses. In addition, BOA has sufficiently alleged that the injury would not have

occurred but for the banks’ challenged conduct. See Duke Power Company v. Carolina

Environmental Study Group, Inc., 438 U.S. 59, 74-75 (1978) (a plaintiff establishes sufficient

causal connection between injury and challenged action if he can make a reasonable showing

that the alleged injury would not have occurred “but for” the defendant’s challenged conduct).

Accordingly, the Court concludes that DB and BNP have standing to assert their claims. 12

ii. Whether BOA Can Pursue the Claims on Behalf of DB and BNP

Having concluded that DB and BNP have Article III standing to bring their claims, the

Court now must determine whether BOA has standing to bring the claims on their behalf. The

FDIC argues that the Amended Complaint does not allege the basis for BOA’s “derivative

standing on behalf of [DB and BNP],” and, therefore, to the extent that BOA seeks recovery on

their behalf, the Complaint must be dismissed for lack of subject matter jurisdiction. (See Dkt.

No. 26 at 19.). 13 BOA counters that the Ocala Facility Documents, specifically the Indenture

Agreement and the Security Agreement, unquestionably give it the right to pursue the claims on

behalf of DB and BNP. 14

12 Given that DB and BNP are seeking recovery for their damages—not Ocala’s—it is not necessary for the Court to determine whether prudential standing requirements have been met. 13 The FDIC raises the same argument with respect to Ocala. However, given that the Court has already concluded that the claims filed on behalf of Ocala must be dismissed, supra at Section IV.C.(1), it need not address this argument. 14 Because the FDIC has framed BOA’s authority to bring suit on behalf of DB and BNP as an issue of subject matter jurisdiction, the Court may consider materials outside the pleadings, including the relevant contract provisions, to determine whether it has jurisdiction. Coalition for Underground Expansion v. Mineta, 333 F.3d 193, 198 (D.C. Cir. 2003).

30 The Court finds BOA’s position to be correct. Section 3.1 of the Indenture Agreement

expressly states that Ocala granted BOA a security interest in all of Ocala’s collateral for the

benefit of DB and BNP:

Section 3.1 Security Interest. (a) Pursuant to the Security Agreement, in order to secure [Ocala’s] Obligations, [Ocala] has pledged, assigned, conveyed, delivered, transferred and set over to [BOA], for the benefit of the [Secured Parties], and has granted to [BOA] for the benefit of the Secured Parties, a security interest in all of [Ocala’s] right, title and interest in and to all of the Collateral assigned to [BOA] pursuant to the Security Agreement.

(See the Indenture Agreement at § 3.1; see also, Security Agreement at § 4.01.). Section 6.02 of

the Security Agreement states that in the event of a default by Ocala:

[BOA] shall have, with respect to the Assigned Collateral…, in addition to any other rights and remedies which may be available to it at law or in equity or pursuant to this [Security] Agreement…all rights and remedies of a secured party under any applicable version of the Uniform Commercial Code…relating to the Assigned Collateral…

(Security Agreement at § 6.02, second paragraph.). Section 9.2 of the Indenture Agreement

requires that in the event of a default, BOA “shall” exercise the rights and remedies available to

it under the Security Agreement. Finally, section 9.10 of the Indenture Agreement authorizes

BOA to:

file such proofs of claim…as may be necessary or advisable in order to have the claims of [BOA] allowed in any judicial proceedings relative to [Ocala]…, its creditors or its property, and shall be entitled and empowered to collect, receive and distribute and money or other property payable or deliverable on any such claim.

(Id. at § 6.).

These provisions make it clear that BOA has a security interest in the very claims being

pursued in this suit. This is sufficient to confer standing on BOA to pursue the present claims on

behalf of DB and BNP. See, e.g., Sprint Commc’ns Co. v. APCC Services, Inc., 554 U.S. 269,

285 (2008) (upholding the long tradition of conferring Article III standing on assignees of

31 claims, even if the party seeking recovery must turn it over to another upon collection); W.R.

Huff Asset Management Co., LLC v. Deloitte & Touch, LLP, 549 F.3d 100, 107 (2d Cir. 2008)

(the assignment of the right to pursue a claim confers standing).

c. Whether Counts IX, X, and XI Have Been Administratively Exhausted under FIRREA

Next, the FDIC argues that this Court lacks subject matter jurisdiction over BOA’s claims

against Colonial and Platinum for civil conspiracy and actual and constructive transfer (Counts

IX, X and XI) because these claims were not raised in proofs of claim. (Dkt. No. 26 at 14.). BOA

concedes that it did not previously raise these claims, but alleges that the proofs of claim were

sufficient to place the FDIC on notice of the potential that BOA would bring such claims. BOA

argues that not only are the conspiracy and fraudulent transfer claims based on “essentially the

same facts and legal theories as those specifically named in the proof[s] of claim, but they seek

the same monetary relief.” (Dkt. No. 35 at 31.). BOA also points out that the proofs of claim

include a catch-all provision that asserts “all other statutory or common law claims that [B]OA

may have” against Colonial or Platinum in addition to the specific claims raised in the proofs of

claim. (Dkt. No. 20, Exs. A and C at Ex. A.).

Where a complaint alleges entirely new legal theories that are different from those

reflected in the administrative proof of claim, the district court is without subject matter

jurisdiction. See Jahn v. FDIC, 828 F. Supp. 2d 305, 317 (D.D.C. 2011). However, such is not

the case here. The proofs of claim in this case detail the facts underlying the civil conspiracy and

fraudulent transfer claims. They include allegations of cooperation between Colonial, Platinum,

and TBW in furtherance of the fraud, thereby laying the foundation for a claim that the banks

and TBW conspired to deprive Ocala of its assets and DB and BNP of their investment. (See e.g.

Dkt. No. 20, Exs. A and C, Ex. A at ¶¶ 4(c)-(e).). The proofs of claim also contain allegations

32 that Colonial and Platinum fraudulently caused funds owed to DB and BNP to be diverted into

accounts maintained by Colonial and/or Platinum. (Id.). These allegations are sufficient to place

the FDIC on notice of potential civil conspiracy and fraudulent transfer claims.

2. Whether the Amended Complaint States a Claim for Fraudulent Transfer

Next, the FDIC argues that even if this Court does not dismiss the fraudulent transfer

claims for lack of exhaustion, Counts IX and X must still be dismissed pursuant to Rule 12(b)(6).

Count IX asserts that TBW, Colonial, and Platinum, acting in concert, made fraudulent transfers

from Ocala accounts at BOA to accounts at Colonial and Platinum with the actual intent to

“hinder, delay, and defraud” Ocala and its investors (i.e., DB and BNP). (Dkt. No. 20 at ¶¶ 220-

222.). BOA asserts that the transfers were made in furtherance of the conspiracy described herein

and that neither Ocala nor DB and BNP received reasonably equivalent value in exchange for the

transfers. (Id. at ¶¶ 223, 225.) Count X asserts the same allegations, in addition to claiming that

TBW, Colonial, and Platinum knew that Ocala was insolvent at the time the transfers were made,

or became insolvent as a result of the transfers. (Id. at ¶¶ 233-234.). BOA brings both Counts IX

and X pursuant to the District’s Uniform Fraudulent Transfer Act (“UFTA”) as codified in D.C.

Code §§ 28-3101-3111 (2001), and seeks to recover the fraudulent transfers on behalf of DB and

BNP. 15, 16 (Dkt No. 20 at ¶¶ 219 and 228.).

The FDIC moves to dismiss the claims, arguing that the Amended Complaint does not

allege many of the necessary elements for fraudulent transfer claims, thereby running afoul of

the pleading requirements under Iqbal and Twombly. The FDIC maintains that BOA failed to

plead facts sufficient to support its contention that the funds transferred from Ocala originated at

15 BOA also brings the claims on behalf of Ocala, but as discussed supra, this Court has determined that Ocala’s claims are barred. 16 UFTA superseded a District of Columbia statute known as the Uniform Fraudulent Conveyance Act of 1995 (the “UFCA”). The parties dispute whether DC’s UFTA statute should govern this dispute or Florida’s statue, but also concede that the point is moot as the statutes are identical.

33 and were the property of Ocala, nor did BOA identify the allegedly fraudulent transfers with

sufficient specificity. This alone, the FDIC argues, warrants dismissal of the claims.

However, the FDIC also contends that dismissal of each claim is warranted for the

following reasons. It claims that Count IX (actual fraudulent transfer) must be dismissed because

BOA failed to meet the heightened pleading requirements of Rule 9(b). In particular, the FDIC

asserts that the Amended Complaint does not contain any allegation that BOA was Ocala’s

creditor, that Ocala made a transfer with the intent to avoid payment of a debt owed to BOA, or

that Colonial and Platinum received the transfers. As for the constructive fraudulent transfer

claim (Count X), the FDIC urges this Court to dismiss the claim because the Amended

Complaint does not allege that BOA was Ocala’s creditor, that Colonial and/or Platinum were

the transferees, that Ocala did not receive “reasonably equivalent value,” or that the transfers left

Ocala with insufficient capital or unable to paid its debts.

The main thrust of BOA’s response to the FDIC’s arguments is that the FDIC has

mischaracterized the fraudulent transfer claims, namely suggesting that the claims are only

brought on BOA’s behalf. BOA points out that it is not relying solely on its position as a creditor

of Ocala in its own capacity; rather, the claims were also brought on behalf of DB and BNP as

the investors in Ocala. BOA maintains that once the claims are properly characterized, it

becomes apparent that the FDIC’s motion to dismiss Counts IX and X must be denied. The Court

agrees.

In order to state a claim for actual fraudulent transfer under UFTA, a plaintiff must plead

that: (1) the debtor (here, Ocala) made a transfer; (2) the plaintiff (i.e., BOA) was a creditor of

the debtor (Ocala); and (3) the debtor (Ocala) made the transfer with actual intent to hinder,

delay, or defraud any creditor of the debtor (Ocala). See Bertram v. WFI Stadium, Inc., 41 A.3d

34 1239, 1244 (D.C. 2012) (citing D.C. Code § 28-3104(a)(1)). In order to establish liability for a

constructively fraudulent transfer, a plaintiff must plead and prove that: (1) the debtor (Ocala)

made a transfer; (2) the plaintiff (BOA) was a creditor of the debtor (Ocala); (3) the debtor

(Ocala) did not receive reasonably equivalent value in exchange for the transfer and was

insolvent or became insolvent as a result of the transfer. D.C. Code § 28-1305(a).

The Amended Complaint asserts the following factual allegations in support of Counts IX

and X: (1) TBW was Ocala’s owner and controlled all major decisions and actions for Ocala

(Dkt. No. 20 at ¶¶ 55-56); (2) all of Ocala’s activities were “directed by TBW” and “in concert

with Colonial” (Id. at ¶ 62); (3) at all relevant times Platinum was controlled by and acted at the

direction of TBW (Id. at ¶ 84); (4) TBW and Colonial “engaged in a scheme to

defraud…investors in Ocala []” (Id. at ¶ 64); (5) TBW, in concert with Colonial, conspired to

divert funds from Ocala (Id. at ¶ 63); (6) TBW and Colonial “misappropriate[d] over $1 billion

in collateral from Ocala” which caused Ocala to “experience[] significant shortfalls in the

amount of collateral it possessed to back its obligations to DP and BNP” (Id. at ¶¶ 64, 65(h)); (7)

TBW and Colonial also engaged in sham mortgage loan sales in order to disguise TBW’s cash

shortfalls from regulators, auditors, third-party lenders and Ocala’s creditors (Id. at ¶ 65(g); 85);

(8) TBW and Colonial concealed their fraudulent activities from BOA by providing it with

falsified collateral lists that misrepresented the status of the Participated Mortgage Loans in

which Ocala should have had a security interest (Id. at ¶ 65(i)); and (9) the fraudulent activities

described above could not have been accomplished without the active participation of each of

TBW, Colonial, and Platinum. (Id. at ¶ 83.).

The Amended Complaint further alleges that the following specific transfers occurred in

furtherance of the fraudulent scheme: (1) between June 30, 2008 and August 3, 2009,

35 approximately $675 million was transferred from Ocala accounts at BOA to a TBW account at

Colonial known as the Custodial Funds Clearing Account (Id. at ¶ 66); (2) during this same time,

approximately $451 million was transferred from Ocala accounts at BOA to a TBW maintained

account at Colonial known as the Master Advance Account (Id. at ¶ 67); (3) also during this time

period, “billions of dollars” were transferred from Ocala to a TBW account at Colonial referred

to as the Investor Funding Account and some of the funds were not used to “purchase

mortgages” and therefore “constituted a theft of Ocala assets” (Id. at ¶ 68); (4) on March 30,

2009, TBW, Colonial and Platinum caused $25 million to be wired from the Ocala Funding

Collateral Account (#722493.4) at BOA to an unnamed account (Account #0030270065) at

Platinum (Id. at ¶¶ 74-75); (5) on April 3, 2009, these same entities caused another $25 million

to be transferred from the Ocala account at BOA to the same unnamed account at Platinum (Id.

at ¶¶ 74, 76); Account #0030270065 was an escrow account set up at Platinum by TBW and

Colonial as part of their fraudulent scheme to obtain TARP funds (Id. at ¶ 77); (6) on October 3,

2008, another $12,239,697.21 was wired from the Ocala Funding Collateral Account at BOA to

Platinum; the funds from this deposit were used to purchase mortgages for the benefit of TBW

(Id. at ¶ 78).

These allegations are more than sufficient to plausibly state a claim for both actual and

constructive fraudulent transfer. Only two of the FDIC’s arguments for dismissal warrant

discussion. First, the FDIC contends that Counts IX and X are deficient because BOA does not

allege any facts that indicate that the purported transfers from Ocala were for the benefit of

Colonial and Platinum. Instead, the FDIC argues, the Amended Complaint alleges that the funds

were transferred to TBW accounts held at Colonial and Platinum. Because TBW and not

36 Colonial or Platinum controlled the accounts, the FDIC argues, liability cannot be imposed on

the banks.

The FDIC fails to cite any authority in support of its position. However, the Court’s own

research shows that a majority of courts interpreting state UTFA statutes have declined to impose

liability for fraudulent transfers on third parties who did not receive the assets in question.

Magten Asset Mgmt. Corp. v. Paul Hastings Janofsky & Walker LLP, No. 04-1256-JJF 2007 WL

129003, *3 (D. Del. Jan. 12, 2007) (interpreting Montana’s UTFA statute); see also GATX Corp.

v. Addington, __ F. Supp. 2d __, No. 11-122-DLB, 2012 WL 1621363, *8 (E.D. Ky. May 9,

2012) (noting that district courts interpreting state UFTA statues in Delaware, Arizona, Indiana,

Maine and Texas have concluded that liability cannot attach to non-transferees); Mack v.

Newton, 737 F.2d 1343, 1358 (5th Cir. 1984) (recognizing that holding nontransferee liable for

fraudulent transfer is inconsistent with purpose of fraudulent transfer statutes which is to

“preserve the assets of the bankrupt” and not “to render civilly liable all persons who may have

contributed in some way to the dissipation of those assets”); Robinson v. Watts Detective Agency,

Inc., 685 F.2d 729, 737 (1st Cir. 1982) (finding no liability because neither defendant received

any of the fraudulently transferred property); Jackson v. Star Sprinkler Corp. of Fla., 575 F.2d

1223, 1234 (8th Cir. 1978) (holding that “recovery under the Bankruptcy Act does not extend to

permit a judgment against ‘conspirators’ who did not receive the property transferred”).

The FDIC does not cite and this Court is unable to locate a case in which a court

interpreting the District’s UFTA statute has addressed this issue. However, BOA has provided no

reason for this Court to deviate from the consistent conclusion of the other states that non-

transferees may not be liable for aiding and abetting a fraudulent conveyance. 17 The Court has

reviewed the Amended Complaint and agrees with the FDIC that BOA never alleged that either 17 Indeed, BOA failed to respond to this argument in its opposition to the FDIC’s motion.

37 Colonial or Platinum received the transfers. (See, e.g., Dkt. No. 20 ¶¶ 36-38, 66-68 (alleging that

the funds were transferred to TBW owned accounts at Colonial); 74-77 (alleging funds were

deposited at Platinum but failing to allege that the funds were in Platinum’s control); 78 (alleging

funds were deposited at Platinum and used for TBW’s benefit).).

However, at oral argument, BOA referred the Court to the Final Reconciliation Report

filed by the Chief Restructuring Officer in the TBW bankruptcy. The Report indicates that

Colonial and Platinum indeed had control of and benefited from the transfers. (See FRR at p. 82,

Table 10.). The Report also indicates that some of the TBW accounts at Colonial were under the

banks’ control. (Id. at p. 56 (stating that while the accounts were in TBW’s name, TBW did not

have signature authority over them).). In light of this, the Court finds that BOA has alleged

sufficient factual allegations to state a plausible claim that Colonial and/or Platinum benefited

from the alleged fraudulent transfers. The parties may revisit this issue if discovery proves

otherwise.

Second, the FDIC argues that the fraudulent transfer claims are deficient because BOA

does not allege that Ocala intended to defraud its creditors or even caused the transfers to

happen; rather, BOA alleges that TBW directed the transfers. This argument is without merit.

Courts have routinely held that, where the transferee controls the disposition of the debtor’s

property, as TBW did here, the fraudulent intent of the transferee may be imputed to the debtor.

See, e.g., In re Acequia, Inc., 34 F.3d 800, 806 (9th Cir. 1994); Schoenmann v. FDIC, No. 10-

03989 CRB, 2011 WL 1522364, *6 (D. Cal. Apr. 21, 2011); In re Chase & Sanborn Corp., 51

B.R. 739, 740-41 (S.D. Fla. 1985) (“The extensive and often circuitous movement of funds

among the several entities controlled by [the debtor’s principal], to his personal benefit…and to

the injury of this debtor, …[establish an] actual[] intent to hinder, delay and defraud this debtor’s

38 creditors.”) Here, BOA alleges that TBW was the entity in control of Ocala and exclusively

controlled its actions. Such allegations are sufficient to state a plausible claim that TBW’s

fraudulent intent may be imputed to Ocala.

Based on the foregoing, the Court concludes that BOA has alleged facts sufficient to state

plausible claims for both actual and constructive fraudulent transfer. Accordingly, the FDIC’s

motion to dismiss Counts IX and X is denied.

3. Whether the Amended Complaint Pleads Fraud with the Requisite Specificity

The FDIC next argues that Count V must be dismissed because BOA failed to meet the

heightened pleading requirements of Fed. R. Civ. P. 9(b). “In alleging fraud or mistake, a party

must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P.

9(b). To state a claim for fraud, a plaintiff must allege the following elements with particularity:

“(1) a false representation, (2) made in reference to a material fact, (3) with knowledge of its

falsity, (4) with the intent to deceive, and (5) an action that is taken in reliance upon the

representation.” In re Estate of McKinney, 953 A.2d 336, 342 (D.C. 2008) (citation omitted).

Motions to dismiss for failure to plead fraud with sufficient particularity are evaluated in light of

the overall purposes of Rule 9(b), which is to “ensure that defendants have adequate notice of the

charges against them to prepare a defense[,]” United States ex rel. McCready v. Columbia/HCA

Healthcare Corp., 251 F. Supp. 2d 114, 116 (D.D.C. 2003), to discourage “suits brought solely

for their nuisance value” or as “frivolous accusations of moral turpitude[,]” United States ex rel.

Joseph v. Cannon, 642 F.2d 1373, 1385 (D.C. Cir. 1981), and to “‘protect reputations of ...

professionals from scurrilous and baseless allegations of fraud,’” id. at 1385 n. 103 (alteration in

original) (quoting Felton v. Walston & Co., Inc., 508 F.2d 577, 581 (2d Cir. 1974)).

39 “[A]lthough Rule 9(b) does not require plaintiffs to allege every fact pertaining to every

instance of fraud when a scheme spans several years, defendants must be able to ‘defend against

the charge and not just deny that they have done anything wrong.’” United States ex rel.

Williams v. Martin-Baker Aircraft Co., Ltd., 389 F.3d 1251, 1259 (D.C. Cir. 2004) (quoting

United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir. 2001));

accord McCready, 251 F. Supp. 2d at 116 (reasoning that a court “‘should hesitate to dismiss a

complaint under Rule 9(b) if the court is satisfied (1) that the defendant has been made aware of

the particular circumstances for which she will have to prepare a defense at trial, and (2) that

plaintiff has substantial prediscovery evidence of those facts’” (quoting Harrison v.

Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir.1999))).

In Count V, BOA alleges that Colonial actively concealed its own financial condition, as

well as the financial condition of TBW and Ocala, and that these misrepresentations allowed the

fraudulent scheme to continue undetected for at least seven years. (Dkt. No. 20 at ¶¶ 170, 172.).

BOA maintains that in its capacity as Indenture Trustee, Custodian, and Collateral Agent under

the Ocala Facility Documents, it reasonably relied on Colonial’s misstatements and omissions to

its own financial detriment and to the financial detriment of DB and BNP. (Id. at ¶¶ 64-65, 171,

176.). According to BOA, but for Colonial’s acts, Ocala would not have issued the Ocala Notes,

thereby allowing TBW and Colonial to steal the proceeds from the Notes, and leaving DB and

BNP to bear the loss. (Id. at ¶ 176.).

The factual allegations set forth in the Amended Complaint that support Count V are as

follows: (1) TBW and Colonial conspired to divert funds from Ocala to cover the monetary

shortfalls TBW was experiencing (Dkt. No. 20 at ¶ 63); (2) executives at Colonial have admitted

that from late 2003 through August 2009, TBW and Colonial engaged in a scheme to defraud

40 Ocala (Id. at ¶ 64); (3) this scheme defrauded third party lenders and creditors of billions of

dollars, including Ocala (Id. at ¶ 65(g)); (4) Colonial provided materially false information to the

FDIC and other regulators in order to conceal evidence of its fraudulent activity (Id. at ¶ 70); (5)

Colonial, with its co-conspirators, diverted $50 million from an Ocala account at BOA (Id. at ¶

74); (6) in March and April 0f 2009, Colonial and its co-conspirators used $12,239,697.21 of

Ocala funds to purchase assets for the benefit of TBW (Id. at ¶ 78); and (7) Colonial made

numerous misrepresentations to regulators, including materially false filings with the Securities

and Exchange Commission that concealed the theft of Ocala’s assets (Id. at ¶ 82).

In further support of its claim for fraud against Colonial, BOA incorporates by reference

the June 15, 2010 indictment of Farkas (TBW’s former chairman), the Government’s June 16,

2010 Motion for Pre-Trial Detention of Farkas, and the Statements of Facts from the criminal

proceedings involving Catherine Kissick (the former Senior Vice President of Colonial) and

Teresa Kelly (the former Operations Supervisor in Colonial’s Mortgage Warehouse Lending

Division). (Dkt. No. 20 at ¶ 64 fn. 6.). BOA asserts that these documents make clear that

Colonial executives knew that in April 2005, Ocala funded $200 million in ineligible loans for

TBW and were also aware that the same funds were being “shipped” back and forth in order to

give the appearance that debt was being eliminated. (Id. at ¶ 90(b), (e).).

The Court concludes that BOA has pled the fraud claim with sufficient particularity to

survive the FDIC’s motion to dismiss. The underlying basis of this claim is a massive fraud that

TBW and Colonial employees admit to endeavoring to hide for years. BOA claims that it does

not have all of the documents necessary to fully set forth the claims (many, it asserts, are in the

possession of the FDIC). (Id. at ¶ 2.). It may be that after discovery, BOA will not be able to

substantiate this claim. However, at this stage of the proceedings, BOA has sufficiently pled the

41 claim so as to give the FDIC adequate notice of the charges against it in order to prepare a

defense, thereby satisfying the purpose of Rule 9(b). See McCready, 251 F. Supp. 2d at 116.

Accordingly, the FDIC’s motion as to Count V is denied.

C. BOA’s Motion to Dismiss the FDIC’s Counterclaims

The FDIC claims that 4,808 Participated Mortgage Loans were purchased by Ocala off of

the Colonial COLB, but that Colonial never received payment for its 99% ownership interest in

those Loans. (Id. at ¶ 39.). These 4,808 Loans are the subject matter of the FDIC’s

Counterclaims against BOA. (Id.).

As discussed previously at Section II.A., Ocala was intended to function in the following

manner: Colonial would send its Participated Mortgage Loans to BOA (in BOA’s capacity as the

Custodian of the Loans under the Custodial Agreement); the Ocala Facility would purchase

Colonial’s ownership interest in the Loans from the COLB Facilities; after BOA sent Colonial

the purchase amount for its ownership interest in the Loans from Ocala’s collateral account at

BOA, Ocala would be the owner of the Loans; the Loans would then be applied as collateral for

the Ocala Notes; next, Ocala would sell the Loans to Freddie Mac; after Freddie Mac purchased

the Loans, the purchase funds (from Freddie Mac) would be sent back to Ocala’s collateral

account at BOA and would serve as either collateral for the Ocala Notes or as capital with which

Ocala could purchase more Loans from the Colonial COLB Facilities. (Dkt. No. 25 at ¶ 40.).

The FDIC alleges that in certain instances commencing around December 2008, the

payments were not made to Colonial (as outlined above); instead, BOA would receive the Loans

from Colonial, and upon instructions from TBW, would pledge them as collateral and sell them

to Freddie Mac, all without payment to Colonial. (Id. at ¶ 43.). The FDIC further asserts that in

transmitting the Loans to Freddie Mac in these instances, BOA would sign a document (the

42 “Form 996Es”) stating that it had the exclusive right to sell them, thus denying the existence of

Colonial’s ownership interest. (Id. at ¶ 44.).

The FDIC asserts that although Colonial eventually received payment for the Loans

(other than the 4,808 Loans) in these instances, it was not paid until after BOA had effectively

stripped Colonial of its ownership interest in the Loans. (Id. at ¶ 45.). The FDIC further claims

that Colonial was unaware of BOA’s actions because it typically received payment for the Loans

within an appropriate period of time. (Id. at ¶ 46.). However, BOA’s conduct was revealed when

Colonial closed on August 14, 2009 and 4,808 Loans had been purchased by Ocala off of the

COLB Facilities, for which Colonial was never paid. (Id. at ¶ 47.).

The FDIC asserts sixteen Counterclaims. (See Dkt. No. 25.). The first five causes of

action are based on BOA’s alleged breach of the Custodial Agreement between it, Colonial and

TBW (Counts 1 through 5). (Id. ¶¶ at 46–92.) The next seven claims are based on BOA’s alleged

violation of the terms of the Bailee Letters that were used to transfer the Participated Mortgage

Loans from Colonial to BOA (Counts 6 through 12). (Id. at ¶¶ 93-103.). The FDIC’s final four

Counterclaims sound in tort (Counts 13 through 16). (Id. at ¶¶ 134-154.). The FDIC alleges that

BOA breached its duty of care as Colonial’s agent, as well as its fiduciary duties of care and

loyalty, by pledging the Loans as collateral for the Ocala Notes and then selling them to Freddie

Mac without first ensuring that Colonial was paid. The FDIC also asserts that BOA breached its

duty of care under a common law bailment by encumbering the loans, executing the Form

996Es, and selling the Loans to Freddie Mac, again without first ensuring that Colonial was paid.

BOA moves to dismiss each of the FDIC’s Counterclaims. First, it argues that the claims

for breach of the Custodial Agreement and Bailee Letters must be dismissed pursuant to

exculpatory clauses in the Custodial Agreement. Second, BOA argues that each of the claims for

43 breach of the Custodial Agreement are independently subject to dismissal because the FDIC

failed to allege violations of any specific contract provisions. Next, BOA argues that the claims

based on breach of bailment fail because they are based on Bailee Letter provisions that are

inconsistent with the Custodial Agreement. Lastly, BOA argues that the tort claims fail as a

matter of law because: (1) the Custodial Agreement expressly limits BOA’s liability; (2) the

Custodial Agreement shelters BOA from liability for claims based on something other than the

Custodial Agreement; (3) the Economic Loss Doctrine bars each of the tort claims as a matter of

law; (4) the Custodial Agreement expressly limits BOA’s liability to acts of gross negligence;

and (5) the Custodial Agreement expressly disclaims any fiduciary duty. The Court will address

each of BOA’s arguments in turn.

1. Whether the Counterclaims are Barred by the Exculpatory Clauses

The Custodial Agreement between BOA, TBW, and Colonial contains the following two

provisions:

[10.]A. Limitation of Liability. Neither [BOA] nor any of its directors, officers, employees or agents…shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the Participated Mortgage Loans, except for its or their own gross negligence or willful misconduct, breach of this Agreement by [BOA] that constitutes bad faith or a material breach that is not cured within 10 days of notice from the other parties or if such breach is a of [SIC] a nature that is not unable [SIC] within such 10-day period and [BOA] is diligently and in good faith working on curing same, then within 30 days of such notice or within such other reasonable period, or other malfeasance by [BOA] hereunder. The duties of [BOA] hereunder shall be mechanical and administrative in nature and nothing in this Agreement or any of the Participated Mortgage Loans, express or implied, is intended to or shall be so construed as to impose upon [BOA] any obligations in respect of this Agreement or any of the Participated Mortgage Loans except as expressly set forth herein. Subject to the foregoing, in performing its functions and duties hereunder on behalf of [Colonial] and/or [TBW], [BOA] shall not (a) be responsible in any manner to [Colonial] or the [TBW] for the effectiveness, enforceability, genuineness, validity, due execution, collectability, priority or sufficiency of this Agreement or any of the Participated Mortgage Loans, or for any recital, representation, warranty,

44 document, certificate, report or statement herein or therein made or furnished under or in connection with this Agreement or the Participated Mortgage Loans, or for the sufficiency of the Collateral or the validity, perfection or priority of any security agreement on the part of [TBW], or the financial condition of [TBW] or the existence or possible existence of any event of default under any such loan or security agreement or any other document or agreement of [TBW] or [Colonial]. [BOA] shall act as the agent of [Colonial] and [TBW] in performing its obligations as Custodian hereunder and with respect to the Participated Mortgage Loans and nothing herein contained shall be deeded to create a fiduciary relationship among or between [BOA], [TBW] or [Colonial].

...

11. LIMITATION ON OBLIGATIONS OF CUSTODIAN. [BOA] agrees to act in accordance with any direction given it pursuant to this Agreement in good faith in the performance of any obligations and duties required pursuant to this Agreement and shall incur no liability to [Colonial] or [TBW] for any acts or omissions on the part of [BOA] except as may result from [BOA’s] gross negligence or willful misconduct occurring in connection with the performance of the duties, responsibilities and obligations to be performed by [BOA] under this Agreement. [BOA] shall also be entitled to rely upon any notice, document, correspondence, request or directive received by it from [Colonial] or [TBW], as the case may be, which [BOA] believes to be genuine and to have been signed or presented by the proper and duly authorized officer or representative thereof, and shall not be obligated to inquire as to the authority or power of any Person so executing or presenting such documents or as to the truthfulness of any statement set forth therein. [BOA] shall have no duties or responsibilities to [TBW] or [Colonial] except as expressly provided in this Agreement or by law or by any other agreements to which [BOA] is a party, and [BOA] shall not be obligated to recognize, nor have any liability or responsibility to, [Colonial] or [TBW] under any instrument to which [BOA] is not a party.

(Custodial Agreement at ¶¶ 10A, 11, attached as Ex. A Myles Decl., Dkt. No. 36-2) (emphasis

added).

BOA argues that the above language forms an exculpatory provision that precludes the

FDIC’s claims for breach of the Custodial Agreement and/or Bailee Letters. (Dkt. No. 43 at 2.).

BOA contends that the exculpatory language limits BOA’s liability to instances of gross

negligence, willful misconduct, material breach, bad faith, or “other malfeasance,” and precludes

45 liability for “material breach” unless the parties have given BOA notice of the breach and an

opportunity to cure, all of which, BOA asserts, the FDIC failed to plead in its Counterclaims.

(Dkt. No. 43 at 3 (citing the Custodial Agreement at ¶ 10A). BOA concedes that the language in

paragraph 10A “is more specific” than that of paragraph 11, but argues that both paragraphs

preclude liability “under the circumstances” alleged in the Counterclaims. (Id. at 3.). According

to BOA, the exculpatory language “could not be clearer or less equivocal.” (Dkt. No. 36 at 14.).

Under Florida law, 18 exculpatory clauses are disfavored and strictly construed against the

party claiming to be relieved from liability. Murphy v. Young Men’s Christian Ass’n of Lake

Wales, Inc., 974 So. 2d 565, 567-68 (Fla. Dist. Ct. App. 2008); see also, Hackett v. Grand Seas

Resort Owner’s Ass’n Inc., 93 So. 3d 378, 380 (Fla. Dist. Ct. App. 2012) (noting that exculpatory

clauses are disfavored). “Such clauses are enforceable only where and to the extent that the

intention to be relieved was made clear and unequivocal in the contract, and the wording must be

so clear and understandable that an ordinary and knowledgeable party will know what he is

contracting away.” Murphy, 974 So. 2d at 568 (quoting Southworth & McGill, P.A. v. S. Bell Tel.

and Tel. Co., 580 So. 2d 628, 634 (Fla. Dist. Ct. App. 1991)); see also, Dynair Tech of Fla. v.

Cayman Airways Ltd, 558 So. 2d 30, 32 (Fla. Dist. Ct. App. 1989) (holding that exculpatory

clauses had “no force and effect” because they contradicted each other).

The FDIC argues that the exculpatory language in question here is anything but clear.

Indeed, according to the FDIC, the exculpatory language is unenforceable because the language

contained in both paragraphs 10A and 11 is unclear and contradictory, thereby making it

impossible for this Court to ascertain the parties’ intent. The FDIC also points to other alleged

contradictions between provisions in the Custodial Agreement. For instance, the FDIC alleges,

18 The parties agree that Florida law governs the Counterclaims for purposes of this motion. (See the Custodial Agreement at § 17A).).

46 on the one hand, the Custodial Agreement requires BOA to “exercise reasonable care in the

custody and preservation” of Colonial’s loans, but on the other hand, it purports to release BOA

for its failure to exercise such care with respect to the Loans. (Dkt. No. 41 at 8 (citing the

Custodial Agreement at ¶¶ 4D, 11).).

The Court finds that, viewing the facts in the light most favorable to the FDIC as it is

required to do, the exculpatory language in the Custodial Agreement is simply too ambiguous to

be “so clear and understandable that an ordinary and knowledgeable person will know what he is

contracting away.” Murphy, 974 So. 2d at 568. First, the Court does not find—as BOA urges it to

do—that paragraph 10A shelters BOA from liability except for actions constituting gross

negligence, willful misconduct, and bad faith, or for an uncured material breach. Paragraph 10A

actually opens BOA up to far greater liability:

[BOA]…shall [not] be liable for any action taken or omitted to be taken by it…in connection with this Agreement or the Participated Mortgage Loans, expect for [BOA’s]… own gross negligence or willful misconduct, breach of this Agreement…that constitutes bad faith or a material breach that is not cured within 10 days of notice…, or other malfeasance by [BOA] hereunder.

(Custodial Agreement at ¶ 10A.) (emphasis added). The term “other malfeasance” as used in

paragraph 10A is undefined and is simply too broad to constitute “clear and unequivocal” notice

of what Colonial contracted away when it entered into the Custodial Agreement. Under Florida

law, “malfeasance” means the commission of some act that is unlawful. See, e.g., Bent v.

Ballantyne, 368 So. 2d 351, 353 (Fla. 1979) (defining malfeasance as the “commission of some

act which is positively unlawful,” citing Black’s Law Dictionary 1109 (rev. 4th ed. 1968));

Thompson v. Napotnik, 923 So. 2d 537, 540 (Fla. Dist. Ct. App. 2006) (defining malfeasance in

the context of recall petitions); Moultrie v. Davis, 498 So. 2d 993, 995 (Fla. Dist. Ct. App. 1986)

(same). Whatever its meaning, the term “malfeasance” is certainly broad enough to include the

47 allegations brought in the FDIC’s Counterclaims. In fact, it is difficult to imagine a more broadly

defined scope of liability.

In addition, there is the nonsensical sentence in paragraph 10A (and repeated in section D

of the same paragraph):

a material breach that is not cured within 10 days of notice from the other parties or if such breach is a of a [SIC] nature that is not unable [SIC] within such 10-day period and Custodian is diligently and in good faith working on curing same, then within 30 days of such notice or within such other reasonable period….

(Custodial Agreement, ¶ 10A.) (emphasis added). It is clear that the sentence, “if such breach is a

of a nature that is not unable within such 10-day period,” contains several clerical errors. The

clerical errors render the sentence unintelligible. This is significant because the sentence is meant

to set forth one of the exceptions to the limitation on BOA’s liability, a limitation that is

meaningless due to its unintelligibility.

Likewise, the exculpatory language in paragraph 11 is ambiguous. BOA argues that

paragraph 11 limits its liability to breaches for gross negligence and/or willful misconduct, but a

careful reading of paragraph 11 shows that it actually opens the door to much greater liability.

The last sentence of paragraph 11 states:

“[BOA] shall have no duties or responsibilities to [TBW] or [Colonial] except as expressly provided in this Agreement or by law or by other agreements to which [BOA] is a party….”

(Custodial Agreement, ¶ 11.) (emphasis added). By imposing on BOA any duties or

responsibilities provided “by law or by other agreements to which [BOA] is a party,” this

sentence can reasonably be interpreted as leaving BOA’s liability open to limitless possibilities.

The question before the Court is whether the language attempting to limit BOA’s liability

is “so clear and understandable that an ordinary and knowledgeable person will know what he is

48 contracting away.” Cain v. Banka, 932 So. 2d 575, 578 (Fla. Dist. Ct. App. 2006). That is not the

case here. Accordingly, the Court determines that the exculpatory language in paragraphs 10A

and 11 is ambiguous and, therefore, unenforceable. 19

2. Whether the Counterclaims State a Claim for Breach of the Custodial Agreement

Having determined that the FDIC’s Counterclaims based on BOA’s alleged breach of the

Custodial Agreement are not barred by the Agreement’s exculpatory provisions, the Court must

now determine whether Counts 1 through 5 allege factual allegations sufficient to survive BOA’s

motion to dismiss for failure to state a claim.

a. Counterclaim 1

Count 1 pertains to BOA’s alleged obligations under paragraph 4B of the Custodial

Agreement. Paragraph 4B provides as follows:

[4]B. Possession of Mortgage Files. Following [BOA’s] receipt of each Mortgage File…, [BOA] shall retain possession and custody thereof solely for the exclusive use and benefit of [Colonial] and [TBW] (to the extent of their respective ownership interests in the Participated Mortgage Loans) as the agent and bailee of [Colonial] and [TBW], and for purposes of perfecting [Colonial’s] and [TBW’s] ownership interest in the Participated Mortgage Loans and the related Mortgage File as contemplated by the Uniform Commercial Code of the State of Florida or other jurisdiction or such other applicable jurisdiction in effect and adopted thereby (it being understood that [BOA] has no responsibility to ensure such perfection or compliance with state law)…[BOA] shall segregate and maintain continuous custody of all mortgage documents constituting the Mortgage File in secure and fire-resistant facilities in accordance with customary standards for such custody.

(Custodial Agreement at ¶ 4B.) (emphasis added.). The FDIC alleges that, pursuant to this

provision, BOA was obligated to hold the Participated Mortgage Loans for the exclusive use and

benefit of Colonial and for the purpose of perfecting Colonial’s ownership interest in said Loans.

19 The court also notes that the Custodial Agreement required BOA to carry “errors and omissions insurance,” something that appears to further contradict BOA’s suggestion that the parties intended to substantially limit BOA’s liability exposure. (See the Custodial Agreement at ¶ 15.).

49 (Dkt. No. 25 at ¶ 68.). The FDIC claims that BOA breached this obligation with respect to the

4,808 Participated Mortgage Loans because it failed to hold the Loans for Colonial’s exclusive

use, and engaged in acts that were inconsistent with “the purposes of perfecting Colonial’s

ownership interests in these [Loans].” (Id. at ¶ 69.).

BOA argues that Count 1 must be dismissed because the claim improperly relies on the

premise that BOA owed an exclusive duty to Colonial, when in fact, it owed a duty to both

Colonial and TBW. (See Dkt. No. 36 at 16.). According to BOA, the Counterclaims allege that it

collateralized and sold the Loans “upon instructions from TBW.” (Id. (citing Dkt. No. 25 at ¶

43.). BOA asserts that because it owed the same duties to Colonial and TBW under paragraph

4B, it cannot have breached “its duties to the one by acting on instructions from the other.” (Id.).

As such, BOA argues Count 1 must be dismissed.20

In response, the FDIC contends that the fact that BOA owed duties to TBW under the

Custodial Agreement in addition to those it owed to Colonial is irrelevant as to whether BOA

breached its obligations to Colonial. According to the FDIC, BOA mischaracterizes Count 1. The

FDIC asserts that it does not claim that BOA breached its duties to Colonial by following TBW’s

instructions; rather, it alleges that Colonial should have received payment for the 4,808 loans

before BOA collateralized the Loans and sold them to Freddie Mac. (See Dkt. No. 41 at 22

(citing Dkt. No. 25 at ¶ 42).).

The Court agrees. Count 1 must be read in context with the rest of the Counterclaims,

which unequivocally allege that BOA failed to ensure that Colonial received payment for the

4,808 Loans before they were pledged as collateral for the Ocala Notes and ultimately sold to

20 BOA also argues that paragraph 11 of the Custodial agreement absolves it of liability for any action it takes pursuant to “any direction given it pursuant to [the Agreement].” (Id. at 17 (citing the Custodial Agreement at ¶ 11.). As this Court has already determined that the exculpatory provisions in paragraph 11 are unenforceable, this argument is unavailing.

50 Freddie Mac. (See Dkt. No. 25 at ¶¶ 36, 39, 43-49.). While not the most artfully pled allegation,

Count 1 need not be read as BOA would have the Court read it (i.e., that BOA owed an exclusive

duty to Colonial), a claim that would not be supported by paragraph 4B. Count 1 is more

logically read to assert that BOA was obligated to hold the Loans for the exclusive use and

benefit of Colonial with respect to Colonial’s 99% ownership interest in the Loans. Indeed,

paragraph 4B states as much: “[BOA] shall retain possession and custody thereof solely for the

exclusive use and benefit of [Colonial] and [TBW] (to the extent of their respective ownership

interests in the Participated Mortgage Loans)….” (Custodial Agreement at ¶ 4B) (emphasis

added). This Court is obligated to view the allegations in the Counterclaims in the light most

favorable to the FDIC. Given this standard, and in light of the remaining allegations in the

Counterclaims, the Court concludes that Count 1 states a plausible claim upon which relief may

be granted. Therefore, BOA’s motion to dismiss Count 1 is denied.

b. Counterclaim 2

Again citing paragraph 4B of the Custodial Agreement, Count 2 alleges that BOA was

obligated to segregate and maintain continuous custody of any mortgages documents associated

with a Participated Mortgage Loan that was transferred to BOA. (Dkt. No. 25 at ¶ 73.). The

FDIC alleges that BOA failed to meet this obligation. (Id. at ¶ 74.). BOA argues that Count 2

must be dismissed because paragraph 4B simply instructs it on how to store the mortgage

documents during the time that they are in its custody. (Dkt. No. 36 at 17-18 (noting that

paragraph 4B requires BOA to store the documents in “secure and fire-resistant facilities in

accordance with customary standards for such custody.). BOA accuses the FDIC of reading into

this provision a requirement that does not exist—namely, that BOA maintain custody of the

documents “in perpetuity.” (Id. at 18.).

51 In response, the FDIC argues that the Counterclaims allege that BOA was required to

segregate the loans in order to “protect Colonial’s ownership interest and that BOA failed to

perform as promised.” Count 2, itself, makes no such allegation. However, the claim

incorporates the allegations contained in Count 1, which do make such an allegation. (Dkt. No.

25 at ¶ 72.). And, as this Court determined above, paragraph 4B plausibly supports such

assertions. Accordingly, BOA’s motion to dismiss is denied as to Count 2.

c. Counterclaim 3

In Count 3, the FDIC alleges that paragraph 4D of the Custodial Agreement obligated

BOA to exercise reasonable care in the custody and preservation of the items that it received

from Colonial, and that BOA failed to fulfill this obligation with respect to the Participated

Mortgage Loans. (Dkt. No. 25 at ¶¶ 78-79.). Paragraph 4D of the Custodial Agreement reads as

follows:

D. Care of Collateral. [BOA] shall exercise reasonable care in the custody and preservation of the Collateral in its possession to the extent required by statutes and in any event shall be deemed to have exercised reasonable care if it (i) takes such action for that purpose as [Colonial] shall reasonably request in writing (but no omission to comply with any request of [Colonial] shall of itself be deemed a failure to exercise reasonable care), or (ii) exercises at least the same degree of care as it would exercise with respect to a like transaction in which it alone is interested.

(Custodial Agreement at ¶ 4D) (emphasis added). BOA argues that Count 3 must be dismissed

because paragraph 4D only requires it to exercise reasonable care “to the extent required by

applicable statute,” and the FDIC does not allege that BOA failed to comply with “any statutory

duty of care.” (Dkt. No. 36 at 19.). In other words, BOA argues, because the FDIC’s claims rest

on a provision that can be breached only be violating a statute, the FDIC must identify what

statute it allegedly breached.

52 The FDIC counters that it is not required to reference a specific statute in its pleadings in

order to survive a motion to dismiss. Citing Skinner v. Switzer, 131 S. Ct. 1289 (2011), the FDIC

argues that the Federal Rules of Civil Procedure do not require that a complaint pin a plaintiff’s

claim to relief to a precise legal theory. (Dkt. No. 41 at 25.). The Court finds Skinner v. Switzer

inapplicable. The FDIC gives no indication whatsoever of which statute BOA allegedly ran

afoul. In the absence of a statute, the Court must dismiss the claim. If the FDIC does have a

statute on which it relies for this claim, it may move to amend the Counterclaims. In the

meantime, Count 3 is dismissed for failure to state a claim upon which relief may be granted.

d. Counterclaim 4

Citing paragraph 7A of the Custodial Agreement, the FDIC alleges in Count 4 that BOA

breached its duty to return to Colonial any Participated Mortgage Loan that was not purchased

within six business days of BOA’s receipt of the Loan. BOA argues that this claim must be

dismissed because it had no duty to act under paragraph 7A unless and until instructed to do so

by TBW.

Paragraph 7A states:

7. RELEASE OF COLLATERAL

A. Release of Collateral to [TBW] or its Designee. [BOA] shall…upon receipt from [TBW] of a Request for Release of Documents and Receipt release any Collateral specified in such request and [BOA] shall thereupon cause delivery of the same to [TBW] or its designee. Any such Request for Release of Documents and Receipt shall be subject to the prior approval of [Colonial], at its sole and absolute discretion. In the event that a Participated Mortgage Loan is not purchased by Ocala within 6 Business Days from receipt of the related Mortgage file, [TBW] shall request, and [BOA] shall deliver, such Mortgage File to [Colonial].

(Custodial Agreement at ¶ 7A.) (emphasis added). As BOA correctly points out, the FDIC did

not allege in the Counterclaims that TBW ever issued a request for a release of an outstanding

53 Participated Mortgage Loan. Apparently conceding this point, the FDIC attempts to avoid the

ramifications of this failure by arguing that the word “and” in the last sentence of paragraph 7A

created an independent requirement on the part of BOA to deliver the Loans, regardless of

whether TBW first requested them. The FDIC argues that “[t]his independent obligation is

sensible because [BOA], the entity in possession of the [L]oans and [Ocala’s] bank accounts,

was in the best position to know whether a [L]oan had been purchased within six days.” (Dkt.

No. 41 at 26.). At a minimum, the FDIC argues, paragraph 7A is ambiguous and, as such, Count

4 cannot be resolved on a motion to dismiss. (Id.).

The Court agrees as to the ambiguity of Count 4. While the FDIC’s reading of paragraph

7A may be a stretch, in deciding a motion to dismiss, this Court is required to evaluate all

inferences derived from the allegations contained in the Counterclaims in the light most

favorable to the FDIC. In doing so, this Court concludes that Count 4 survives BOA’s motion to

dismiss.

e. Counterclaim 5

In Count 5, the FDIC alleges that under paragraph 17K of the Custodian Agreement,

BOA represented and warranted that it did not have at the time of execution, and would not hold

during the existence of the Agreement, any interest adverse to Colonial, by way of security or

otherwise, in the Participated Mortgage Loans. (Dkt. No. 25 at ¶ 88.). Paragraph 17K states:

K. No Adverse Interest. By execution of this Agreement, [BOA] represents and warrants that it currently holds, and during the existence of this Agreement shall hold, no interest adverse to [Colonial] or [TBW], by way of security or otherwise, in any Participated Mortgage Loan, and hereby waives and releases any such interest which it may have in any Participated Mortgage Loan as of the date hereof.

(Custodial Agreement at ¶ 17k.). The FDIC maintains that BOA breached this warranty and

argues that the Court need look no further than the Amended Complaint—in which BOA asserts

54 a security interest in some of the Participated Mortgage Loans—to see evidence of the breach.

(Id. at ¶¶ 89-90.).

BOA counters that paragraph 17K only applies to BOA’s interests in its own capacity.

(Dkt. No. 36 at 20.). BOA disavows that it brought the underlying action in its own capacity;

rather, it filed suit “in its capacity as the representative of the Ocala Facility.” (Id. at 21.).

Furthermore, the “Custodial Agreement contemplated ‘that BOA would obtain security and

possessory interests in the loans on behalf of Ocala’s Secured Parties.’” (Id.).

The FDIC responds that paragraph 17K is not clearly and unambiguously limited to BOA

in its own capacity. (Dkt. No. 41 at 27.). The “clear purpose” of the Custodial Agreement was to

ensure that Colonial’s ownership interest in the Loans was protected. The Agreement, the FDIC

argues, contemplated that BOA would obtain a security interest on behalf of the Ocala Facility

after Colonial received payment for its interest in the Loans. Because BOA failed to remit

payment, Colonial’s interest was not satisfied, and the requirements of paragraph 17K continue

to apply. (Id. at 28.).

The Court agrees. At a minimum, paragraph 17K is ambiguous. Furthermore, as

discussed previously at Sections II.B.-D., it is not entirely clear that BOA does not seek relief for

damages it allegedly incurred in its own capacity. As such, Count 5 will not be dismissed.

3. Whether the Breach of Bailment Counterclaims Fail as a Matter of Law

Next, BOA moves, in the alternative, to dismiss the breach of bailment Counterclaims

(Counts 6 through 12) pursuant to Rule 12(b)(6) for failure to state a claim upon which relief

may be granted. Counts 6 through 12 pertain to Colonial’s use of a standard financing form

known as a “bailee letter” (the “Bailee Letter(s)”) when it transferred Participated Mortgage

55 Loans to BOA under the Custodial Agreement. 21 (See Dkt. No. 25 at ¶ 31.). The FDIC maintains

that the Bailee Letters either created a new agreement between Colonial and BOA that

superseded the Custodial Agreement or the Letters modified the Agreement. Either way, the

FDIC argues, BOA was obligated to abide by the terms of the Bailee Letters. (Id. at ¶ 32-33.).

The provisions of the Bailee Letters are as follows:

Pursuant to the terms and conditions set forth below, [Colonial] hereby deliver[s] to [BOA], as Custodian for [Ocala], with this letter, the [Participated Mortgage Loans]…By taking physical possession of this Bailee Letter, the [Participated Mortgage Loans] and other loans documents, [BOA] hereby agrees and is bound:

i. to hold in trust, as bailee for Colonial [], the [Loans]…, subject to the direction and control of Colonial until [BOA’s] status as bailee is terminated…;

ii. to not release or deliver…the [Loans]…to [TBW]…which release, delivery or other action could cause the security interest of [Colonial] to become unperfected or which could otherwise jeopardize the perfected security interest and/or title and ownership interest of [Colonial] in the Loan(s); … iv. to return the [Loans] immediately to Colonial [] upon receipt of a written or telephonic request by Colonial…;

v. not to honor request or instructions from [TBW] relating to any [Loans]…;

vi. immediately upon [Ocala’s] acceptance or rejection of the Loan(s) for purchase, and in any event within forty-five (45) days after the date of delivery of this Bailee Letter to either (A) remit the [sales proceeds] to Colonial or (b) [SIC] return the [Loans] to Colonial; …

By your acceptance of the enclosed [Loans], you are bound by the terms, provisions and conditions of this Bailee Letter. We request that you acknowledge receipt of this Bailee Letter and the enclosed [Loans] by signing in the space provided at the bottom of this Bailee Letter and returning it to

21 The parties do not explain why it was Colonial rather than TBW who transferred the loans, as the Custodial Agreement contemplated.

56 Colonial…(but your failure to do so in no way compromises the terms, provisions and conditions of this Bailee Letter or nullifies your agreements resulting from your acceptance of the enclosed [Loans], as set forth in this Bailee Letter.

(Dkt. No. 36, Myles Decl., at Ex. B; Dkt. No. 25 at ¶ 33.). The FDIC claims that the 4,808

Participated Mortgage Loans that are the subject of its Counterclaims were transferred to BOA

pursuant to the above-listed terms of the Bailee Letters, yet Colonial never received payment for

its ownership interest in those Loans. (Id. at ¶ 39.). As such, the FDIC asserts, BOA breached the

terms of the bailment between the parties.

BOA argues that Counts 6 through 12 must be dismissed because: (1) to the extent that

the FDIC argues that the Bailee Letters modified, amended or superseded the Custodial

Agreement, that argument fails as a matter of black-letter contract law; or (2) to the extent that

the FDIC argues that the Custodial Agreement and Bailee Letters can be harmonized, that

argument similarly fails because the Letters contradict material terms of the Custodial

Agreement. (See Dkt. No. 36 at 22-23.).

a. Whether the Bailee Letters Are Enforceable Contracts between Colonial and BOA

BOA argues that the provisions of the Bailee Letters upon which the FDIC relies for its

breach of bailment claims are inconsistent with the Custodial Agreement, and therefore each

claim must be dismissed. BOA contends that the “broad structure and terms” of the Bailee

Letters are inconsistent with Custodial Agreement because they read as though BOA’s custodial

duties were owed only to Colonial, and not divided with a duty to TBW (as provided for in the

Custodial Agreement). As an example of this, BOA points to the provisions of the Bailee Letters

that require BOA to “hold in trust, as bailee for Colonial [], the Loans]…” and prohibit BOA

from releasing the Loans to TBW if “doing so would jeopardize the security interest of

57 [Colonial],” and further prohibit BOA from “honor[ing] requests or instructions from [TBW]

relating to any [Loans]….” (See Dkt. No. 36 at 29 (quoting the Bailee Letter at ¶ 2(i),(ii), and

(v).).

BOA argues that these terms directly contradict the Custodial Agreement, which require

BOA to act as the Custodial Agent and Bailee for both Colonial and TBW, referring the Court to

the provisions of the Custodial Agreement that state that BOA is appointed as “Custodian…by

each [Colonial] and [TBW] as its agent and bailee hereunder,” and further state that BOA “shall

retain possession and custody [of the Loans] solely for the exclusive use and benefit of

[Colonial] and [TBW],” and authorize BOA to act on the instructions of both Colonial and TBW.

(Id. at 28-29 (quoting the Custodial Agreement, ¶¶ 2, 4B and 7).).

According to BOA, these inconsistencies render the Bailee Letters unenforceable, noting

that it is “hornbook law” that a party cannot unilaterally supersede or amend an agreement. BOA

claims that Florida courts have rejected similar tactics by parties who attempted to modify

governing contracts with unilateral form letters. (Id. (citing Gulf Power Co. v. Coalsales II,

L.L.C., 661 F. Supp. 2d 1270, 1279 (N.D. Fla. 2009) and Newkirk Constr. Corp. v. Gulf Cnty.,

366 So. 2d 813, 815 (Fla. Dist. Ct. App. 1979).). BOA maintains that a recent district court

decision from the Ninth Circuit, FDIC v. First Am. Title Ins. Co., No. SACV 10–0713 DOC

(MLGx), 2011 WL 3737435 (C.D. Cal. Aug. 24, 2011), is directly on point. First American

involved a loan transaction in which IndyMac Bank was the lender and First American Title

Insurance Company (“First American”) was the closing agent. Id. at *1. The FDIC, as receiver

for IndyMac Bank, sought to enforce negotiated Closing Instructions between the parties, and

First American argued that a pre-printed Funding Letter that First American included with the

closing documents served to modify the Closing Instructions. Id. In granting summary judgment

58 for the FDIC, the district court held that the Funding Letter did not modify the Closing

Instructions for several reasons. First, the court noted that nothing in the Funding Letter

purported to modify the Instructions. Id. at *5-6 (stating that “[i]f First American were truly

modifying [the] Closing Instructions, it would have specified exactly what provisions to which it

did not agree and would have indicated so on the Closing Instructions document itself”)

(emphasis in original). Second, the court noted that the Funding Letter was not supported by

additional consideration to IndyMac for First American’s purported release from the Closing

Instructions. Id. at *6. Lastly, the court rejected First American’s argument that merely by

funding the loan, IndyMac performed under the Funding Letter and had thereby accepted its

terms. Id. at *7.

BOA argues that the same is true in this case. It asserts that the Bailee Letters, like the

Funding Letter in First American, make no mention of any intent, much less “specific intent,” to

modify the Custodial Agreement. (Dkt. No. 36 at 26.). Nor do the Bailee Letters offer any sort of

additional consideration for the reduction of BOA’s or TBW’s rights under the Custodial

Agreement. In addition, BOA argues, the FDIC does not allege in the Counterclaims that BOA

ever signed, acknowledged, or even read the Bailee Letters. Therefore, BOA argues, this Court

cannot enforce the terms of the Bailee Letters over the negotiated terms of the Custodial

Agreement because to hold otherwise “would afford too little recognition to the other documents

and the overall character of the transaction.” (Id. at 27 (quoting Pioneer Commercial Funding

Corp. v. Am. Fin. Mortg. Corp., 579 Pa. 275, 296 (Pa. 2004).). Finally, BOA argues that the

Custodial Agreement contains an integration clause that prohibits unilateral amendments to the

Agreement. (Id. at 24 (citing the Custodial Agreement at ¶ 17C).).

59 In response, the FDIC argues that the Counterclaims allege factual allegations sufficient

to state a claim that bailments existed between Colonial and BOA and that these bailments,

established pursuant to the terms of the Bailee Letters, represent new, independent agreements

between Colonial and BOA that are separate from the Custodial Agreement. (See Dkt. No. 41 at

10.). The FDIC maintains that the fact that BOA did not sign the Bailee Letters is not fatal to the

enforceability of the agreements because Florida does not require a countersignature on a bailee

letter in order to create a bailment. (Id. at 10 (citing Fla. Stat. Ann. § 679.3131, comment 9; 4

James J. White, Robert S. Summers, & Robert A. Hillman, Uniform Commercial Code § 31-8

(6th ed.).). Instead, the FDIC argues, acceptance of the collateral documents constitutes assent to

the terms of the bailee letter. Id. (citing Goldman Sachs Mortg. Co. v. Natixis Real Estate

Capital, Inc., No. 0602359/2007, 2008 WL 1999522 (Trial Order) (N.Y. Sup. Ct. Apr. 30, 2008)

(“The standard practice in the [mortgage warehouse lending industry] is not to require a

countersignature on the bailee letter…[the] acceptance of the collateral documents constitutes

assent to the terms of the bailee letter…”).). Here, BOA accepted the terms of the Bailee Letters

when it accepted the Loans under cover of the Letters, held them in trust, and then remitted

payment to Colonial (until the alleged breach) once the Loans were sold to Ocala. (Id. at 13

(citing Counterclaims, ¶¶ 31, 36 and 42).).

What is more, the FDIC argues, the Bailee Letters expressly stated that acceptance of the

Loans transmitted under the Bailee Letter constituted acceptance, and failing to countersign the

Letter “in no way…nullifies [BOA’s] agreements resulting from [BOA’s] acceptance of the

enclosed Note(s)…” (Id. at 12 (citing Bailee Letter at p. 2).). The FDIC claims that this provision

of the Bailee Letters is consistent with the use of bailee letters in the mortgage warehouse

lending industry as a whole and is reflected in Florida’s statutes, which allow a mortgage

60 warehouse lender who transfers mortgage notes to a custodian pursuant to a bailee letter to retain

its perfected security interest in the notes, as long as the lender instructed the bailee to hold the

collateral for the benefit of the lender. (Id. at 13 (citing Fla. Stat. Ann. § 679.3131(8), n. 9

(“Requiring [lenders] to obtain authenticated acknowledgments …would be unduly burdensome

and disruptive of established practices”)).).

In the alternative, the FDIC argues that the Bailee Letters operated to modify the terms of

the Custodial Agreement, and BOA’s acceptance of the Bailee Letters in the ordinary course of

business without objection formed either “(i) an ‘agreement in writing’ that overrides the

integration clause in the Custodial Agreement or (ii) an amendment of the Custodial Agreement

through course of performance.” (Dkt. No. 41 at 28.).

The Court concludes that the FDIC has alleged facts sufficient to state a plausible claim

for breach of bailment. To create a bailment under Florida law, there must be: (1) the delivery of

a bailor’s property to a bailee; (2) acceptance of the property by the bailee; and (3) an agreement,

either express or implied, to use the property for a particular purpose and later redeliver it to the

bailor. See Monroe Sys. for Bus., Inc. v. Intertrans Corp., 650 So. 2d 72, 75-76 (Fla. Dist. Ct.

App. 1994); 46 Am. Jur. Proof of Facts 3d 361 (1998). Here, the FDIC alleges that: (1) Colonial

delivered the Loans in question to BOA under cover of a Bailee Letter (Dkt. No. 25 at ¶ 31); (2)

BOA accepted the Loans (Id. at ¶ 43); and (3) BOA agreed to hold the Loans, and within 45 days

of delivery, to either remit payment for the Loans or return the Loans to Colonial (Id. at ¶ 33.).

These factual allegations are sufficient to state a plausible claim that a separate, independent

contract for bailment existed between the parties.

Moreover, the Court is not persuaded that the terms of the Bailee Letters materially

conflict with the terms of the Custodial Agreement. The Custodial Agreement unequivocally

61 states that BOA’s duties with respect to TBW and Colonial are limited to the extent of each of

TBW’s and Colonial’s respective ownership interests in the Loans. See, e.g., the Custodial

Agreement at Fifth WHEREAS Clause (stating that BOA is authorized to act as TBW’s and

Colonial’s custodial agent and bailee “to the extent of their respective ownership interests in

[the] Participated Mortgage Loans”) (emphasis added); see also Id. at ¶ 4B (“…the Custodian

shall retain possession and custody thereof solely for the exclusive use and benefit of [Colonial]

and [TBW] (to the extent of their respective ownership interests in the Participated Mortgage

Loans) as the agent and bailee of [Colonial] and [TBW], and for purposes of perfecting

[Colonial’s] and [TBW’s] ownership interest in the [Loans]….”) (emphasis added). 22 Similarly,

the Bailee Letters acknowledge that Colonial has only a “participation” interest in the Loans.

(See Bailee Letter, Introductory paragraph “[Colonial] owns a participation interest in the

Loan(s) and the proceeds thereof…”). Accordingly, the Bailee Letters can be read to affect only

Colonial’s participation interest in the Loans, thereby leaving unaffected TBW’s interest in the

Loans and BOA’s obligations thereto under the Custodial Agreement.

What is more, the Custodial Agreement gives Colonial the power to direct BOA’s actions

towards the Loans on behalf of TBW. (See Custodial Agreement at ¶ 2 “[TBW] hereby

irrevocably appoints [Colonial] as its attorney in fact and agent…to take any action and give any

direction hereunder on behalf of [TBW] with respect to [TBW’s] interest in any [Loan], and

[BOA] shall be entitled to rely on [Colonial’s] directions and instructions on behalf of itself and

[TBW]”). As such, Colonial’s use of the Bailee Letters can be read as entirely consistent with the

terms of the Custodial Agreement. At a minimum, these provisions create an ambiguity that

cannot be resolved on a motion to dismiss. See Novoneuron Inc. v. Addiction Research Inst., Inc.,

22 It is undisputed that at the time the Loans were transferred to BOA pursuant to the Custodial Agreement, Colonial had a 99% participation interest in the Loans and TBW retained a 1% interest. (Dkt. No. 20 at ¶ 43; Dkt. No. 25 at ¶ 11.).

62 326 F. App’x 505, 508-509 (11th Cir. 2009) (trial court erred in granting motion to dismiss for

failure to state a claim when disputed contract was susceptible to two different interpretations,

each one of which was reasonably inferred from the terms of the contract).

Nor is the Court persuaded by BOA’s argument that Paragraph 17C of the Custodial

Agreement bars the creation of a separate agreement. Paragraph 17C states:

Entire Agreement. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof including any prior custody agreements. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.

(Custodial Agreement, ¶ 17C.) (emphasis added.). The plain language of this provision precludes

only agreements made prior to, or contemporaneously with, the Custodial Agreement. Because

the Bailee Letters were issued after the parties executed the Custodial Agreement, the first

sentence of paragraph 17C is inapplicable to the present situation. Nor does the last sentence of

paragraph 17C, which refers to “modified or amended,” necessarily bar the creation of an

entirely new agreement. On the briefing before it, the Court is not persuaded that there was a

meeting of the minds that this last sentence was meant to exclude an entirely new agreement

between the parties in perpetuity.

Likewise, BOA’s argument that the Bailee Letters did not create a binding agreement

because they were not signed by BOA is unavailing. A countersignature on a bailee letter is not

required to form a contract. See, e.g., Goldman Sachs Mortg. Co., 2008 WL 1999522 (a bailee’s

failure to countersign a bailee letter does not make bailment unenforceable as a matter of law);

Fla. Stat. Ann. § 679.3131, comment 9; 4 White, Summers, & Hillman, supra § 31-8. Instead,

63 acceptance can be conveyed through performance or implied from the circumstances. See 8A

Am. Jur. 2d Bailments § 38 (2012); 8 C.J.S. Bailments § 25 (2012) (“If the contract is in writing,

its enforceability is not affected by the fact that it is not signed[.]”). “A contract may be binding

on a party despite the absence of a party’s signature. The object of a signature is to show

mutuality or assent, but these facts may be shown in other ways, for example, by the acts or

conduct of the parties.” Gateway Cable T.V., Inc. v. Vikoa Constr. Corp., 253 So. 2d 461, 463

(Fla. Dist. Ct. App. 1971). Indeed, the Bailee Letters themselves provide that BOA became

“bound by the terms, provisions and conditions of the Bailee Letter” by its “acceptance of the

[Participated Mortgage Loans].” (Dkt. No. 36, Myles Decl., Ex. B at p. 2.).

Moreover, the cases cited by BOA do not support its motion. First, their applicability to

the present situation is limited because they do not involve the use of bailee letters in the

mortgage warehouse lending industry which, the FDIC correctly points out, receives special

statutory treatment because of the nature of the industry. See, e.g., Fla. Stat. Ann. § 679.3131(8),

n. 9 (noting that “[r]equiring [lenders] to obtain authenticated acknowledgments …would be

unduly burdensome and disruptive of established practices” in the warehouse lending industry).).

The cases are distinguishable in other ways as well. For example, BOA’s reliance on First

American is misplaced. First, importantly, First American was decided on summary judgment.

2011 WL 3737435 at *2. The decision is replete with references to the fact that there was “no

evidence” to support First American’s position that the agreement in question had been amended.

Id. at *4. Here, the FDIC is not required to produce such evidence in order to defeat BOA’s

motion to dismiss. Second, the question in First American was whether the existing contract

between the parties—the closing instructions—had been modified by a later agreement—the

funding letter. Id. Here, the FDIC maintains that the Bailee Letters represent new, independent

64 contracts between Colonial and BOA that are separate and distinct from the Custodial

Agreement. As such, the First American court’s conclusion that the funding letter did not clearly

evidence the parties’ intent to modify the closing instructions is inapplicable to the present

situation. Likewise, Gulf Power Co. v. Coalsales II, LLC, 661 F. Supp. 2d 1270 (N.D. Fla. 2009)

and Newkirk Constr. Corp. v. Gulf Cnty., 366 So. 2d 813 (Fla. Dist. Ct. App. 1979) are

distinguishable on the same grounds.

BOA refers this Court to a Pennsylvania case for the proposition that a bailee letter

cannot supersede an existing agreement. (Dkt. No. 36 at 26-27 (citing Pioneer Commercial

Funding Corp. v. Am. Fin. Mortg. Corp., 579 Pa. 275 (Pa. 2004).). However, the Pioneer court

merely made a passing reference to this issue and specifically limited its finding to “the

circumstances presented” in that case. Pioneer, 579 Pa. at 296 (reversing and remanding for

entry of judgment notwithstanding a jury verdict in favor of bank). And again, the issue was

decided after the parties had the benefit of discovery. Id.

Therefore, construing the Counterclaims in the FDIC’s favor as this Court must do in

deciding BOA’s Rule 12(b)(6) Motion, this Court concludes that the FDIC has plausibly alleged

the existence of a new contract pursuant to the Bailee Letters. See Sierra Equity Grp., Inc. v.

White Oak Equity Partners, LLC, 650 F. Supp. 2d 1213, 1228 (S.D. Fla. 2009) (noting that

whether the contract was accepted is a question of fact that cannot be resolved on a motion to

dismiss).

b. Whether the Breach of Bailment Counterclaims State a Claim for Relief

Next, BOA argues that even if the Bailee Letters constitute valid, enforceable agreements

between the parties, the individual bailment Counterclaims fail to state a claim upon which relief

may be granted. BOA moves to dismiss Counts 6 and 7, alleging that the provisions of the Bailee

65 Letters on which the FDIC bases these claims are inconsistent with the terms of the Custodial

Agreement, and therefore, unenforceable. This argument fails for the reasons discussed in the

previous section. BOA’s motion to dismiss Counts 6 and 7 is denied.

In Counts 8 and 9, the FDIC alleges that, under the terms of the Bailee Letters, BOA was

obligated to either remit to Colonial the proceeds for the sale of the Participated Mortgage Loans

or to return the Loans to Colonial within 45 days of the initiation of the bailment. (See Dkt. No.

25 at ¶¶ 107, 112, and 113.). The FDIC alleges that more than 45 days have passed since the

4,808 Participated Mortgage Loans were transferred to BOA, and BOA has not returned the

Loans, nor has it remitted the proceeds for the 4,808 Loans to Colonial, an amount that the FDIC

alleges is approximately $898,873,958. (Id. at ¶ 108.). The FDIC alleges that this failure

constitutes a breach of the bailment. (Id. at ¶ 109.).

In moving to dismiss Counts 8 and 9, BOA mischaracterizes the claims as a demand that

BOA “pay” the sale proceeds. (Dkt. No. 36 at 31-32.). It argues that neither the Custodial

Agreement nor the Bailee Letters require BOA to “pay” for the Loans. The FDIC makes no such

claim. To the contrary, the FDIC alleges that BOA breached the bailment by failing to either

“remit”, i.e., transmit, the sale proceeds to Colonial or return the Loans (with Colonial’s

ownership interest intact) within the 45 day timeframe. (Dkt. No. 25 at ¶ 108.). The FDIC alleges

that BOA’s failure to comply with this obligation under the Bailee Letters has damaged Colonial

in the amount of nearly $1 billion. These allegations are sufficient to state a claim for relief.

BOA also maintains that it returned the Loans to Colonial. (Dkt. No. 36 at 32-33.). This

argument borders on farcical. As the FDIC correctly maintains, BOA did not “return” the Loans

to Colonial in Colonial’s capacity as owner of the Loans, but sent them to Colonial’s Trust

Department in Colonial’s capacity as custodian for Freddie Mac. What is more, BOA returned

66 “qualitatively different [L]oans,” that are now “owned by Freddie Mac.” (Dkt. No. 41 at 36; Dkt.

No. 25 at ¶ 38.). Again, the FDIC has alleged factual allegations that are sufficient to state a

claim for relief. Accordingly, BOA’s motion to dismiss Counts 8 and 9 is denied.

In Count 10, the FDIC alleges that BOA breached the bailment agreement by failing to

subordinate its alleged interest in the Participated Mortgage Loans to Colonial’s interest. (Dkt.

No. 25 at ¶¶ 118-120.). The FDIC alleges that, “based in part on the allegations of BOA’s

Amended Complaint, BOA has asserted alleged interest of its own which BOA claims to be

superior to, rather than subordinate to, Colonial’s interest in the Participated Mortgage Loans.”

(Id. at ¶ 119.). The FDIC asserts that by bringing these claims, BOA has breached the bailment.

(Id. at ¶ 120.).

BOA counters that it does not assert any interest in the Loans on its own behalf. (Dkt. No.

36 at 34.). Rather, it brings these claims in its representative capacity on behalf of Ocala, DB,

and BNP. (Id.). Contrary to BOA’s assertion, the record is not clear that BOA is not asserting

any interest of its own in the Loans. For instance, in its opposition to the FDIC’s motion to

dismiss the Amended Complaint, BOA argues that it seeks to recover for losses incurred by

Ocala, “including losses incurred by all investors in the Ocala facility and by BOA itself.” (Dkt.

No. 35 at 18) (emphasis in original). BOA states further that it “sought an administrative remedy

for Ocala and all parties with interests in Ocala assets, including Ocala’s investors and BOA

itself.” (Id.) (emphasis in original). In addition, the proofs of claim state “[t]he tax ID number

shown is for [BOA]. Many of the claims described in this proof of claim, however, are made by

[BOA] in its capacity as Trustee on behalf of the secured parties with respect to [Ocala Notes].”

(Dkt. No. 20 at Ex. A, n. 1.) (emphasis added). This statement indicates that at least some of the

claims in the proofs of claim were brought by BOA on behalf of its own purported interest in the

67 Loans. Accordingly, the FDIC has stated a plausible claim that BOA breached the bailment by

failing to subordinate its interest in the Loans to that of Colonial. Count 10 will not be dismissed.

In Counts 11 and 12, the FDIC alleges that BOA exercised its alleged rights with respect

to the Participated Mortgage Loans without first receiving written authorization to do so from

Colonial and, instead, acted pursuant to instructions from TBW. (Dkt. No. 25 at ¶¶ 123-126 and

130-131.). The FDIC asserts that these actions breached the terms of the bailment. (Id. at ¶¶ 127

and 132.). BOA counters that the requirement to seek written authorization from Colonial before

acting and the prohibition from following TBW’s instructions are inconsistent with the terms of

the Custodial Agreement and therefore cannot be the basis for a claim for relief. This argument

fails for the reasons discussed above at Section IV.D.3.a. BOA’s motion to dismiss Counts 11

and 12 is denied.

4. Whether the Tort Counterclaims Fail As a Matter of Law

The final four Counterclaims against BOA sound in tort. The FDIC alleges that BOA

breached its duty of care as Colonial’s agent, as well as its fiduciary duties of care and loyalty to

Colonial, by pledging the Participated Mortgage Loans as collateral for the Ocala Notes and then

selling them to Freddie Mac without first ensuring that Colonial was paid. (See Dkt. No. 25 at ¶¶

135-137, 140-142, and 145-147.). The FDIC also asserts that BOA breached its duty of care

under a common law bailment by encumbering the loans and selling them to Freddie Mac. (Id. at

¶¶ 150-153.). BOA argues that these claims must be dismissed for two reasons: (1) the economic

loss doctrine bars the tort claims, and (2) the Custodial Agreement limits or precludes BOA’s tort

liability.

68 a. Whether the Economic Loss Doctrine Bars the Tort Claims

“The economic loss rule is a judicially created doctrine that sets forth the circumstances

under which a tort action is prohibited if the only damages suffered are economic losses.” Indem.

Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So. 2d 532, 536 (Fla. 2004). One of the

circumstances in which the economic loss doctrine applies is “when the parties are in contractual

privity and one party seeks to recover damages in tort for matters arising out of the contract.” Id.

The economic loss doctrine “is designed to prevent parties to a contract from circumventing the

allocation of losses set forth in the contract by bringing an action for economic loss in tort.” Id.

Any recovery in tort “requires proof of facts that are distinct from breach of contract.” Invo Fla.,

Inc. v. Somerset Venturer, Inc., 751 So. 2d 1263, 1265 (Fla. Dist. Ct. App. 2000); accord

Electronic Sec. Sys. Corp. v. S. Bell Tel. and Tel. Co., 482 So. 2d 518, 519 (Fla. Dist. Ct. App.

1986).

BOA argues that the only loss asserted by the FDIC is the loss of the 4,808 Participated

Mortgage Loans, for which Colonial should have been paid a Takeout Amount of $898,873,958.

BOA maintains that because Colonial was entitled to this Takeout Amount only by virtue of the

written agreements between the parties, the alleged damages fall squarely within the definition of

economic losses barred by the economic loss rule. (See Dkt. No. 36 at 38-39.). The FDIC

counters that this argument is not ripe for review at this stage in the litigation because BOA has

moved to dismiss the FDIC’s breach of contract claims and Federal Rule of Civil Procedure

8(d)(3) expressly permits a party to plead claims in the alternative, even if the claims are

inconsistent. (See Dkt. No. 41 at 39.)

69 The Court agrees. At this early stage of the litigation, the Court finds that the tort claims

are adequately pled and not barred by the economic loss doctrine. To the extent that discovery or

further case development show that the duties allegedly breached by BOA are in fact based on or

inextricably intertwined with valid written agreements between Colonial and BOA, the Court

will revisit the issue. Bd. of Trs. of the City of Lake Worth Emps.’ Ret. Sys. v. Merrill Lynch

Pierce Fenner & Smith, Inc., No. 3:10–cv–845–J–32MCR, 2011 WL 2144658 at *4 (M.D. Fla.

May 31, 2011); see also Scott v. District of Columbia, 101 F.3d 748, 753 (D.C. Cir. 1996)

(stating that plaintiff can properly plead alternative theories of liability, regardless of whether

such theories are inconsistent with one another); Robinson v. District of Columbia, 736 F. Supp.

2d 254, 262 (D.D.C. 2010) (“Federal Rule of Civil Procedure 8(d)(3) permits a plaintiff to plead

inconsistent claims in support of alternative theories of recovery…”).

b. Whether the Custodial Agreement Limits BOA’s Tort Liability

BOA’s final argument is that the Custodial Agreement precludes tort liability for BOA.

(See Dkt. No. 36 at 40.). As discussed supra, BOA contends that the Custodial Agreement

expressly limits BOA’s liability to breaches committed through “gross negligence or willful

misconduct.” (Id. citing the Custodial Agreement at ¶¶ 10A, 11.). BOA argues that the FDIC

seeks to do an “end-run” around this contractual limitation by alleging breaches of non-

contractual tort duties, none of which amount to gross negligence or willful misconduct. (Id.).

Therefore, BOA argues, the tort claims must be dismissed as a matter of law.

BOA’s argument fails for two reasons. First, as discussed in Section IV.D.1., supra, the

exculpatory clauses in the Custodial Agreement are simply too ambiguous to effectively limit

BOA’s liability. Second, the claims in Counterclaim 13 through Counterclaim 16 relate to the

bailment relationship created by the Bailee Letters, not the Custodial Agreement. As discussed in

70 Section IV.D.3.a., supra, the FDIC has plausibly stated that the Bailee Letters created a new

agreement between Colonial and BOA that is independent of the Custodial Agreement.

Accordingly, BOA’s motion to dismiss Counterclaims 13 through 16 is denied.

V. CONCLUSION

A. As to the FDIC’s Rule 12(b)(1) Motion to Dismiss, the Court Finds and Rules as Follows:

1. BOA did not oppose the portion of the FDIC’s Rule 12 (b)(1) Motion seeking

dismissal of the equitable relief claims (Counts II, IV, and VII) for lack of subject matter

jurisdiction. Accordingly, the Court treats this portion of the Motion as conceded and hereby

GRANTS it as to Counts II, IV and VII;

2. BOA failed to exhaust Ocala’s administrative remedies under FIRREA.

Accordingly, this Court lacks subject matter jurisdiction over any portion of the remaining

claims that seek relief on behalf of Ocala. Accordingly, the Court GRANTS the FDIC’s Rule

12(b)(1) Motion to the extent that the Amended Complaint states claims on behalf of Ocala;

3. BOA has standing under the Ocala Facility Documents to bring claims on behalf

of itself and Ocala’s investors. Accordingly, this Court has subject matter jurisdiction over the

remaining claims to the extent that BOA seeks relief on behalf of itself and on behalf of DB and

BNP. The Court DENIES the FDIC’s Rule 12(b)(1) Motion to the extent that it seeks to dismiss

such claims on grounds of lack of standing;

4. The proofs of claim alleged sufficient factual allegations to administratively

exhaust BOA’s claims for civil conspiracy and actual and constructive transfer. Accordingly, this

Court has subject matter jurisdiction over Counts IX, X, and XI and DENIES the FDIC’s Rule

12(b)(1) Motion as to these Counts;

71 B. As to the FDIC’s Rule 12(b)(6) Motion to Dismiss, the Court Finds and Rules as Follows:

1. BOA pled fraud (Count V) with the requisite specificity under Fed. R. Civ. P.

9(b). Accordingly, the FDIC’s Rule 12(b)(6) Motion is DENIED as to Count V;

2. BOA alleged sufficient facts to state a plausible claim for fraudulent transfer

(Counts IX and X). Accordingly, the FDIC’s Rule 12(b)(6) motion is DENIED as to Counts IX

and X;

C. As to BOA’s Rule 12(b)(6) Motion to Dismiss, the Court Finds and Rules as Follows:

1. The FDIC alleged facts sufficient to state claims for breach of the Custodial

Agreement (Counterclaims 1 – 2, and 4). These Counterclaims are not barred by the exculpatory

clauses contained in the Custodial Agreement and otherwise sufficiently allege claims for relief.

Accordingly, BOA’s Rule 12(b)(6) Motion is DENIED as to Counterclaims 1 – 2, and 4;

2. The FDIC failed to allege which statute BOA allegedly ran afoul of in

administering its obligations under the Custodial Agreement. As such, Counterclaim 3 fails to

state a claim upon which relief may be granted. Accordingly, BOA’s Rule 12(b)(6) Motion is

GRANTED as to Counterclaim 3;

3. The FDIC alleged facts sufficient to state claims for breach of bailment

(Counterclaims 6 – 12). Accordingly, BOA’s Rule 12(b)(6) Motion is DENIED as to

Counterclaims 6 – 12;

4. The FDIC alleged facts sufficient to state claims for tort liability against BOA

(Counterclaims 13 – 16). Neither the Economic Loss Doctrine nor the exculpatory clauses in the

Custodial Agreement bar such claims. Accordingly, BOA’s Rule 12(b)(6) Motion is DENIED as

to Counterclaims 13 – 16.

72 An appropriate Order accompanies this Memorandum Opinion.

Dated this 10th day of December, 2012.

A Barbara Jacobs Rothstein U.S. District Court Judge