Abbington Spe, LLC v. U.S. Bank, Nat'l Ass'n
352 F. Supp. 3d 508
E.D.N.C.2016Background
- Abbington SPE, LLC borrowed $17.5M in 2005 and signed a promissory note requiring monthly payments due on the 11th; late charges apply if payment not received within 15 days (i.e., after the 26th), and an Event of Default is triggered if any sum payable is not paid on or before its due date.
- After a first late payment in June 2015, Abbington subsequently paid late several months; U.S. Bank (successor to the lender) and C-III (special servicer) sent payoff statements and ultimately accelerated the loan balance; Abbington paid a disputed payoff amount under reservation of rights.
- Abbington sued in Onslow County Superior Court asserting breach of contract, fraudulent and negligent misrepresentation, breach of covenant of good faith and fair dealing, declaratory relief (estoppel and §45-36.7), UDTPA, and unenforceable-penalty claims.
- Defendants removed to federal court on diversity grounds and moved to dismiss under Rule 12(b)(6); Abbington moved to remand based on a forum-selection clause in the note (it limited borrower to suit in state or federal courts "sitting" in the county where the property is located).
- The court held defendants validly removed (forum clause did not waive lender’s removal right) and dismissed Abbington’s complaint without prejudice, granting leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether forum-selection clause bars removal/remand | Clause limits borrower to courts "sitting" in Onslow County; no federal court sits in Onslow County, so case must be remanded | Clause does not waive lender’s removal right; §1441 governs removal; diversity jurisdiction exists | Denied remand; removal proper under §1441 because lender did not contractually waive removal |
| Whether account statements modified the note (breach of contract) | Account statements created a grace period to 26th and thus amended the note; defendants breached by declaring default for payments before 26th | Note unambiguously required payment by the 11th; alleged statements did not supply consideration to modify the note | Dismissed: no contract modification alleged (no new consideration); note’s terms control |
| Fraud/negligent misrepresentation based on statements that defaults would not be invoked before 26th | Abbington relied on servicer statements that payments through 26th would be timely and not trigger default/fees | Statements contradict the clear written note; reliance was unreasonable as a matter of law given the written terms and Abbington’s knowledge | Dismissed: misrepresentation claims fail because reliance was unreasonable or statements were not false regarding late charges; note governed default timing |
| UDTPA, good-faith covenant, and unenforceable-penalty claims | Defendants’ conduct was deceptive/unfair, breached implied good faith, and late/default charges are an unenforceable penalty | UDTPA does not cover mere contract breaches; no special fiduciary relationship for good-faith claim; loan is exempt from N.C. Gen. Stat. §24-8 usury limits (commercial/large loan) | Dismissed: UDTPA fails (no actionable deception beyond contract dispute); implied-good-faith claim collapses into contract and no special relationship alleged; penalty/usury claim barred by statutory exemption |
Key Cases Cited
- Barbour v. Int'l Union, 640 F.3d 599 (4th Cir. 2011) (removal statutes construed narrowly; doubts resolved in favor of state court jurisdiction)
- Hoschar v. Appalachian Power Co., 739 F.3d 163 (4th Cir. 2014) (party who removes bears burden to establish subject-matter jurisdiction)
- Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148 (4th Cir. 1994) (removing party must establish jurisdiction)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard for Rule 12(b)(6): legal conclusions not accepted)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
- Forbis v. Neal, 361 N.C. 519 (N.C. 2007) (elements of fraud and requirement of reasonable reliance)
- Bicycle Transit Auth., Inc. v. Bell, 314 N.C. 219 (N.C. 1985) (implied covenant of good faith and fair dealing in contracts)
- Int'l Harvester Credit Corp. v. Bowman, 69 N.C. App. 217 (N.C. Ct. App. 1984) (reliance on representations contrary to a written contract is unreasonable)