Robert Allen Taylor Company v. United Credit Recovery, LLC, a Delaware Limited Liability Company, US Bancorp, a Delaware corporation d/b/a U. S. Bank National Association, Leonard G. Potillo
A15-1902
| Minn. Ct. App. | Oct 3, 2016Background
- RATC purchased three portfolios of US Bank direct-deposit-account (DDA) consumer debt from broker United Credit Recovery (UCR) in 2009, financing the purchases with investor loans marketed as short-term, high-yield investments.
- Each purchase-and-sale agreement contained a Delaware choice-of-law and exclusive-Delaware-forum clause. UCR and US Bank traded signed versions of those agreements.
- RATC alleged it discovered the portfolios were not "zero-agency" or current, that thousands of "affidavits of correctness" were false or backdated, and that respondents retained "direct pays" that should have passed to RATC (alleged > $1,000,000).
- RATC and RATC Lenders sued UCR, US Bank, and several individuals/entities; the district court dismissed claims against UCR (forum clause) and US Bank (failure to plead claims with required particularity), dismissals affirmed on appeal.
- The court considered whether the forum-selection clauses were enforceable and whether the amended complaint met Minnesota pleading standards (including Rule 9.02 particularity for fraud-based averments and Rule 8.01 notice pleading).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of forum-selection clause (UCR) | Clause is unenforceable because UCR engaged in fraud and enforcement would be unfair and inefficient | Agreements expressly select Delaware law and forum; clause is valid and not unreasonably inconvenient | Clause enforceable; district court did not abuse discretion; claims against UCR dismissed without prejudice |
| Fraudulent misrepresentation (US Bank) | US Bank participated in and facilitated false marketing/affidavits; alleged agency/consent links US Bank to misrepresentations | Allegations are conclusory and fail to identify who did what, when, where, and how; Rule 9.02 particularity not met | Dismissed: amended complaint fails to plead the who/what/when/where/how tying US Bank to alleged fraud |
| Minnesota Securities Act claim (US Bank) | Statutory claim need not allege scienter; plaintiffs sufficiently pleaded misrepresentations tied to sale of securities | Statutory claim parallels federal Rule 10b-5 elements and requires particularized allegations naming each defendant; plaintiffs failed to do so | Dismissed: heightened pleading applies; allegations do not specifically identify US Bank's fraudulent or negligent role |
| Conversion/theft/unjust enrichment/conspiracy/promissory estoppel (US Bank) | Plaintiffs alleged wrongful retention of purchase price and direct-pays; alleged promises and concerted scheme support torts and conspiracy | Claims are labels/conclusions without factual detail; many rest on the same insufficient fraud averments; conspiracy fails absent underlying tort | All dismissed: claims are legally insufficient under Rule 8.01 and, where grounded in alleged fraud, fail Rule 9.02 particularity |
Key Cases Cited
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (U.S. 1972) (forum-selection clauses presumptively enforceable absent strong showings of unreasonableness)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (U.S. 2010) (challenges to contract must target specific clause to avoid enforcement of arbitration/forum clause)
- Hauenstein & Bermeister, Inc. v. Met-Fab Indus., Inc., 320 N.W.2d 886 (Minn. 1982) (articulates Minnesota three-factor test for forum-selection clause unreasonableness)
- Martens v. Minn. Mining & Mfg. Co., 616 N.W.2d 732 (Minn. 2000) (fraudulent-misrepresentation equated with fraud; high pleading threshold)
- Bahr v. Capella Univ., 788 N.W.2d 76 (Minn. 2010) (pleading standard under Rule 8.01; labels and conclusions insufficient)
- Stubblefield v. Gruenberg, 426 N.W.2d 912 (Minn. 1988) (general allegations of fraud insufficient under Rule 9.02)
- Murr Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066 (8th Cir. 1995) (particularity requires time, place, contents, identity of person making misrepresentation)
- U.S. ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552 (8th Cir. 2006) (fraud pleading must identify the who, what, where, when, and how)