978 F. Supp. 2d 552
W.D. Pa.2013Background
- Plaintiffs redeveloped the Country Club Apartments in Mooresville, NC for resale.
- Financing was sought in 2007 from BB&T, Wells Fargo and others; a loan funded closing.
- Mr. Edwards, with ~30 years of real estate experience, managed the venture.
- A Wells Fargo-supplied interest rate swap was entered effective May 31, 2007, tied to a floating loan.
- Plaintiffs allege misrepresentations and various related state-law claims; action filed June 2011 and removed to federal court.
- Court granted in part and denied in part Wells Fargo’s Motion for Partial Summary Judgment; trial reset for Feb. 2014.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations on fraud/misrepresentation claims | Plaintiffs discovery tolled claims; continuing violation theory applies | Claims time-barred for misrepresentations known by May–Aug 2007 | Claims 1–3 based on timing/hedging misrepresentations are time-barred |
| Proxy misrepresentation about LIBOR as a rate proxy | Wells Fargo misrepresented LIBOR as a suitable proxy for rates | No evidence Wells Fargo stated LIBOR as a suitable proxy for borrowers’ rates | Summary judgment granted for Cause of Action 1–3 to the extent based on proxy misrepresentation |
| Market rate misrepresentation | Plaintiffs relied on market-rate representations for the swap | No specific representations about a market rate; testimony shows belief not reliance | Summary judgment granted as to market-rate misrepresentation claims |
| Fiduciary duty/constructive fraud | Allison alleges fiduciary duties and constructive fraud | No fiduciary relationship; no basis for constructive fraud | Summary judgment granted on fiduciary duty and constructive fraud claims |
| UDTPA applicability to capital-raising transaction | UDTPA should apply despite capital-raising context | Oberlin Capital and Business Court decisions exclude capital-raising swaps | Denial of Summary Judgment as to UDTPA claim without prejudice; reasonable dispute remains |
Key Cases Cited
- Branch Banking & Trust Co. v. Thompson, 107 N.C.App. 53, 418 S.E.2d 694 (1992) (no fiduciary duty in borrower-lender context; arms-length not fiduciary)
- Oberlin Capital, L.P. v. Slavin, 147 N.C.App. 52, 554 S.E.2d 840 (2001) (UDTPA does not apply to capital-raising transactions)
- Bonham v. Wolf Creek Academy, 767 F.Supp.2d 558 (2011) (no negligent misrepresentation from omission without duty)
- Amex Assurance Co. v. Caripides, 179 F.Supp.2d 309 (S.D.N.Y.2002) (mutual mistaken belief not actionable; standard fraud requirements)
- Crossman v. Life Care Centers of America, Inc., 738 S.E.2d 737 (N.C.App. 2013) (frustration of purpose; doctrine limits on actionable claims)