United States District Court, W.D. Virginia, Roanoke Division
Elizabeth K. Dillon United States District Judge
Dickson Properties, LLC (Dickson) sues defendant Wells Fargo
Bank (Wells Fargo), asserting claims for a violation of the
Bank Holding Company Act, 12 U.S.C. § 1972 et
seq., and breach of contract. Wells Fargo moves to
dismiss. It argues that Dickson's complaint fails to
state a claim upon which relief can be granted, and so it
must be dismissed under Federal Rule of Civil Procedure
12(b)(6). The court heard oral argument on the matter on
September 14, 2017. Because the court concludes that res
judicata bars Dickson's claims, Wells Fargo's motion
will be granted and Dickson's complaint will be
March 2016, the Fourth Circuit issued an opinion in a case
brought against Wells Fargo by Dickson's parent company,
Providence Hall Associates (Providence Hall), a
Virginia-based limited partnership. Providence Hall
Assoc. Ltd. P'ship v. Wells Fargo, 816 F.3d 273 (4th
Cir. 2016). Specifically, the court affirmed the dismissal of
Providence Hall's Bank Holding Company Act and breach of
contract claims against Wells Fargo on res judicata grounds.
Id. at 276. The court reasoned that the litigation
of sale orders in bankruptcy court by Providence Hall's
Chapter 11 bankruptcy trustee precluded Providence Hall from
later bringing claims that called into question the debt
those sale orders served to extinguish. This case is, in all
relevant aspects, identical, with one twist: it involves a
bankruptcy “designee” rather than a trustee.
is a wholly owned subsidiary of Providence Hall, and the two
entities were jointly liable on their debts to Wells Fargo.
(Dickson designee order, Dkt. No. 11-17 at 3.) Dickson
alleges that, during loan agreement negotiations with Wells
Fargo, Wells Fargo indicated it would not provide a loan
unless Dickson also agreed to enter into an interest rate
swap agreement as a necessary condition of the loan. (Compl.
¶¶ 58-60, Dkt. No. 1-2.) Dickson agreed to do so,
and the parties executed a loan agreement on February 16,
2006. (Id. ¶ 4.) Dickson's $500, 000 loan
was to come to maturity on February 28, 2011. (Id.
¶ 7.) According to Dickson, Wells Fargo falsely
represented to it that a forbearance agreement was
forthcoming, even though the bank had no intention of
renewing the note or forbearing from collecting it.
(Id. ¶¶ 42-44.) A forbearance agreement
never came, and on March 4, 2011, Wells Fargo informed
Dickson that its line of credit must be fully paid off.
(Id. ¶ 45.) Shortly over a week later, Wells
Fargo declared Dickson in default under the master loan
agreement. (Id. ¶ 51.)
same month, Providence Hall, Dickson's parent company,
filed a Chapter 11 bankruptcy case in the United States
Bankruptcy Court for the Eastern District of Virginia. (Dkt.
No. 11-24.) Providence Hall did not list any claim against
Wells Fargo as an asset on its bankruptcy schedules. (Case
No. 11-11656-BFK, Dkt. No. 1, at Schedule H.) The bankruptcy
court granted Providence Hall's sale motions and required
that all net sale proceeds be paid to Wells Fargo. (Dkt. No.
11-13 at 2-3; Dkt. No. 11-18 at 4; Dkt. No. 11-21 at 2-3.)
months later, in May 2011, Dickson executed and recorded a
quitclaim deed that transferred its interest in Dickson
County, Tennessee, property to Providence Hall for no
consideration. (Dkt. No. 11-17 at 1.) Because the property
was subject to a lien in favor of Wells Fargo, the quitclaim
deed allowed Dickson to obtain the benefit of an automatic
likewise filed a Chapter 11 bankruptcy case in the United
States Bankruptcy Court for the Eastern District of Virginia
in December 2011. (Dkt. No. 11-17 at 2.) Like Providence
Hall, Dickson did not list any claim against Wells Fargo as
an asset on its bankruptcy schedules. (Dkt. No. 11-22 at 2;
Dkt. No. 11-17 at 1.) The bankruptcy court authorized Marc
Albert (Albert), whom it had already appointed as Providence
Hall's Chapter 11 trustee, to act as Dickson's
designated representative, or “designee.” (Dkt.
No. 11-17 at 2-3.)
received the bankruptcy court's approval in August 2012
to sell the Dickson County property in order to apply the net
sale proceeds to the Wells Fargo debt. (Dkt. No. 11-13 at
2-3.) That fall, Providence Hall and Dickson moved separately
to dismiss their respective bankruptcy cases, as the debt to
Wells Fargo had been paid in full. (Dkt. No. 11-23 at 1-2.)
In its motion, Dickson stated that it had no assets,
operations, or creditors independent of Providence Hall, and
that all of Dickson's creditors would be paid from the
Providence Hall bankruptcy estate. (Dkt. No. 11-22 at 2-4.)
The court granted the motions in December 2012. (Dkt. No.
February 28, 2014, Providence Hall filed a complaint against
Wells Fargo in state court, in Loudoun County. (Dkt. No.
11-24.) Four days later, Dickson filed an almost identical
complaint in the circuit court for Roanoke City. (Dkt. No.
1-2.) The cases were removed; Dickson's removed case is
the instant case. The District Court for the Eastern District
of Virginia dismissed the Providence Hall complaint on res
judicata grounds because of the bankruptcy court's sale
orders allowing Providence Hall to pay Wells Fargo in full.
Providence Hall Assoc. Ltd. P'ship v. Wells
Fargo, No. 1:14-cv-352, 2014 WL 12704845 (E.D. Va. May
20, 2014). The Fourth Circuit unanimously affirmed dismissal
of the Providence Hall complaint on res judicata grounds.
Providence Hall Assoc. Ltd. P'ship, 816 F.3d at
Fargo urges the court to dismiss the Dickson complaint for
the same reason. (Def.'s Mot. to Dismiss, Dkt. No. 11.)
Dickson counters that res judicata cannot apply because,
while trustees are in privity with debtors, designees are
not. (Pl.'s Resp. in Opp'n to Mot. Dismiss (Pl.'s
Opp'n), Dkt. No. 15.)
Standard of Review
motion to dismiss under Rule 12(b)(6) tests the legal
sufficiency of a plaintiff's complaint to determine
whether the plaintiff has properly stated a claim.
Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th
Cir. 1999). To avoid dismissal, the “complaint must
establish ‘facial plausibility' by pleading
‘factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.'” Clatterbuck v. City of
Charlottesville, 708 F.3d 549, 554 (4th Cir. 2013)
(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678