U.S. Bank National Ass'n v. BFPRU I, LLC

230 F. Supp. 3d 253, 2017 WL 398410
CourtDistrict Court, S.D. New York
DecidedJanuary 30, 2017
Docket16-cv-01450 (JGK)
StatusPublished
Cited by10 cases

This text of 230 F. Supp. 3d 253 (U.S. Bank National Ass'n v. BFPRU I, LLC) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
U.S. Bank National Ass'n v. BFPRU I, LLC, 230 F. Supp. 3d 253, 2017 WL 398410 (S.D.N.Y. 2017).

Opinion

OPINION AND ORDER

John G. Koeltl, District Judge:

This action arises out of a dispute between the plaintiffs, U.S. Bank National Association and Wells Fargo Bank, N.A., (collectively, the “Lender”); the defendants and third party plaintiffs, BFPRU I LLC, (the “Borrower”) and Mark Karasick and Michael Silberberg (the “Guarantors”); and the third party defendant, the Lender’s loan servicer, LNR Partners, LLC (“LNR”). The defendants move to dismiss the plaintiffs’ First Amended Complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure. This motion is denied. LNR moves to dismiss the defendants’ third party complaint. This motion is granted.

I.

The following facts alleged in the First Amended Complaint and the third party complaint are accepted as true for purposes of the pending motions.

In 2013, the Lender and Borrower modified a Loan Agreement related to a $410 million commercial mortgage loan (the “Loan”) secured by two commercial buildings in Chicago, One Prudential Plaza and Two Prudential Plaza (the “Property”) by entering into an Amended Loan Agreement. First Am. Compl. (“FAC”) ¶ 1, ECF No. 31. The Amended Loan Agreement bifurcated the loan into a $836 million “A” Note and a $74 million “B” Note. FAC ¶ 25.

The Amended Loan Agreement provided that the Borrower could prepay the loan upon a “Refinancing Capital Event.” FAC ¶ 1, 27-28. To initiate a Refinancing Capital Event, the Borrower would notify the Lender by providing the proposed terms of a refinancing offered by a separate third-party lender. FAC ¶28. The Borrower and Lender would then each obtain “as is” appraisals of the Property that “conform[] to the requirements for appraisals relied upon by regulated financial institutions.” FAC ¶ 29. If the appraisals were within 5% of each other, the “Appraised Fair Market Value” would be 96% of the average of the two appraisals, and this figure would be used to calculate the amount required to secure a release of the Property. FAC ¶ 30-31. The Amended Loan Agreement also stated that the Borrower would “cooperate with and timely provide any and all information as may be reasonably requested by the Lender’s appraiser in order to complete [the] appraisal.” FAC ¶ 29 (quoting Am. Loan Agmt. § 3.6(c), Edwards Decl. Ex. 1, ECF No. 37). The Loan Agreement and Amended Loan Agreement stated that the failure to satisfy these obligations constituted an [258]*258Event of Default. See FAC ¶¶ 79-80. Further, as part of the modification, the Guarantors signed a Guaranty Agreement agreeing to be held liable to the Lender for any losses sustained by the Lender arising out of or in connection with “any fraud, willful misconduct or intentional material misrepresentation by Borrower ... or by any Guarantor in connection with the Loan.” FAC ¶ 84.

The Borrower initiated a Refinancing Capital Event on April 2, 2015, and the Lender then engaged Integra Realty Resources (“IRR”) on April 21, 2015 to perform an appraisal on the Property. FAC ¶ 32-35. The following day, IRR submitted a written request to the Borrower’s managing agent for the Property, Jones Lang LaSalle (“JLL”) for information related to the Property, including a specific request for all leasing information and “information on leases under negotiation.” FAC ¶ 35.. JLL responded to the request by providing information on various types of leasing activity, but did not provide any information relating to leases under negotiation. FAC ¶ 38-39. JLL also provided financial projections to IRR forecasting a decline in leasing at the Property. FAC ¶ 39.

Based on the information provided by JLL, IRR completed its appraisal on May 27, 2015 and arrived at an “as is” value of the Property of $430,000,000 as of May 12, 2015. FAC ¶ 41. The Borrower’s appraiser, Butler Burgher Group (“BBG”) completed its appraisal on May 26, 2015, arriving at an “as is” value of $427,400,000 as of April 8, 2015. FAC ¶42. Based on these two appraisals, the Appraised Fair Market Value was determined to be $411,552,000. FAC ¶ 43.

The Refinancing Capital Event was set to close on July 30, 2015, and in anticipation of the closing, the Borrower and Guarantors provided a Certification to the Lender. FAC ¶ 44. The Certification stated that the Borrower and Guarantors, “as of this 30th day of July, 2015,” had “provided all financial, operating and leasing information about the Property” to the Lender, to IRR, and BBG; that “[a]ll such financial, operating and leasing information provided to Lender, [IRR] and [BBG] is complete, true and accurate in all respects”; and that “[n]one of Borrower or any Guarantor is aware of any additional financial, operating or leasing information that would have a material effect on the value of the Property.” FAC ¶ 44 (quoting Certification ¶ 1, Kapoor Decl. Ex. 3, ECF No. 39).

Upon closing, as a result of the priority of payment schedule outlined in the Amended Loan Agreement, the Lender received full repayment for the A-note, but received no payment for the B-note. FAC ¶¶ 2, 74-75, 97. Thereafter, the Lender learned that a newly refinanced loan made to the Borrower and secured by the Property was being marketed in a prospectus that valued the Property at $642,000,000. FAC ¶ 47. The valuation was based on an “as is” appraisal performed by CBRE Inc. as of June 24, 2015, which, according to the plaintiffs, used the same methodology as the Borrower and Lender appraisals. FAC ¶ 4, 47.

The plaintiffs allege that the CBRE appraisal exceeded the other appraisals because the CBRE appraisal incorporated the terms of several pending leases that were determined to have a high probability of being fully executed. FAC ¶ 53. The plaintiffs allege that the defendants or their agents participated in these lease negotiations, that they had knowledge of these lease negotiations, and that all property leases required approval by the Guarantors prior to execution. FAC ¶¶ 60-62.

According to the defendants’ third party complaint, a majority of these new leases were disclosed to the plaintiffs’ loan servi-[259]*259cer and the third party defendant, LNR, in connection with the Borrower’s May 2015 and June 2015 property reserve disbursement requests for tenant improvements and third party leasing brokerage commissions. Third Party Compl. (“TPC”) ¶ 41, ECF No. 13. LNR provided loan servicing to the Lender pursuant to a Pooling and Servicing Agreement (the “PSA”), to which the defendants were not a party. See TPC ¶ 52; PSA, TPC Ex. 6. The PSA further specified that nonparties such as the Borrower and Guarantors had no benefits, rights, remedies or claims under the PSA. PSA ¶ 12.08 at 298. Finally, as part of the July 30, 2015 closing of the Refinancing Capital .Event, the defendants signed a General Release that “absolutely, unconditionally, and irrevocably waive[d]” any claims against LNR. See General Release, Kapoor Deck Ex. 4, ECF No. 39.

The plaintiffs filed suit, alleging (1) breach of contract against the Borrower; (2) breach of contract against the Guarantors; (3) fraudulent concealment and misrepresentation against the Borrower and Guarantors; (4) negligent omission and misrepresentation against the Borrower and the Guarantors; and (5) unjust enrichment against the Borrower. FAC ¶¶ 88-157. The defendants move to dismiss the plaintiffs’ claims.

The defendants filed a third party complaint against LNR for (1) negligent omission; (2) contribution; and (3) indemnification. LNR moves to dismiss the defendants’ claims.

II.

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Bluebook (online)
230 F. Supp. 3d 253, 2017 WL 398410, Counsel Stack Legal Research, https://law.counselstack.com/opinion/us-bank-national-assn-v-bfpru-i-llc-nysd-2017.