State College Area School District v. Royal Bank of Canada
825 F. Supp. 2d 573
M.D. Penn.2011Background
- SCASD and Royal Bank entered into a forward-start swap (2006 Contract) with an indirect Royal Bank subsidiary; bond counsel was Rhoads and SCASD's solicitor was Miller Kistler.
- Rhoads issued a letter affirming the 2006 Contract was valid and binding; Miller Kistler issued a letter confirming SCASD authority to enter the Agreement.
- SCASD later sought to void the 2006 Contract and 2007 Amendment via declaratory judgment in this court; Royal Bank faced a potential termination fee if the Agreement was voided.
- Royal Bank sought damages from Rhoads and Miller Kistler for negligent misrepresentation related to their opinions.
- Miller Kistler and Rhoads moved to dismiss/strike; court addressed Rule 14, ripeness, and merits under Rule 12(b)(6).
- Court granted Miller Kistler’s dismissal for failure to state a claim against it; denied Rhoads’ motion to dismiss in part, allowing claims to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 14(a) third-party impleader is proper in a declaratory judgment | Royal Bank argues impleader is consistent with Rule 14's purposes. | Rhoads and Miller Kistler contend declaratory actions do not support third-party practice. | Rule 14(a) permits impleader when potential loss may arise; both motions to strike denied. |
| Whether Royal Bank's negligent misrepresentation claim survives Rule 12(b)(6) against Rhoads | Royal Bank pled facts showing reliance and misrepresentation in Rhoads' letter. | Rhoads argues statements were opinions and disclaimed duty to update; no misrepresentation. | Royal Bank adequately pled misrepresentation by Rhoads; claim survives. |
| Whether Royal Bank's negligent misrepresentation claim survives Rule 12(b)(6) against Miller Kistler | Royal Bank claims Miller Kistler misrepresented validity of the Agreement. | Miller Kistler asserts its letter concerned authority only and does not convey misrepresentation. | Miller Kistler granted for dismissal; no plausible misrepresentation found. |
| Whether the claim against Rhoads is ripe for adjudication | Royal Bank asserts damages have already accrued and will be realized if voided. | Rhoads argues damages depend on underlying decision; premature if unresolved. | Ripeness concerns do not defeat third-party claims; analysis warranted given underlying risk. |
Key Cases Cited
- Monarch Life Ins. Co. v. Donahue, 702 F. Supp. 1195 (E.D. Pa. 1989) (Rule 14 allows impleader when loss may arise from underlying declaratory judgment)
- Kline v. First Western Gov't Secs., Inc., 24 F.3d 480 (3d Cir. 1994) (opinion/disclosure clauses do not bar reliance for negligent misrepresentation)
- Eisenberg v. Gagnon, 766 F.2d 770 (3d Cir. 1985) (discusses reliance on projections and opinions in misrepresentation context)
- U.S. Fire Ins. Co. v. Reading Mun. Airport Authority, 130 F.R.D. 38 (E.D. Pa. 1990) (considered broad purposes of Rule 14 in declaratory actions)
- Monarch Life Ins. Co. v. Donahue, 702 F. Supp. 1195 (E.D. Pa. 1989) (reiterated applicability of Rule 14 in insurance/declaratory contexts)