578 F. App'x 276
4th Cir.2014Background
- Appellant The Caper Corporation had an interest rate swap with Wells Fargo as successor to Wachovia Bank.
- Original Loan of $3.8 million in 2005 funded purchase of a Wilmington, NC office building secured by a deed of trust.
- In 2005–2006, a refinanced loan of $4.3 million with LIBOR-based rate was offered, with a separate swap option to fix the rate.
- Original Swap Agreement fixed at 6.91% with LIBOR+1.70% payable, expiring Jan 15, 2016, including termination fees for early unwind.
- Amendment in 2006 extended the swap term to Feb 10, 2016 and added an Additional Termination Event; it did not shorten the swap, and a Master Agreement merged terms.
- In 2012, after lease nonrenewal, Appellant sought termination of the swap with no fee, but Wells Fargo insisted on the termination fee on sale payoff and deed release.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraud/misrepresentation about termination without fee | Caper alleged oral promises ended swap without fee. | Written Amendment controls; no justifiable reliance after signing. | Counts One–Two fail; no justifiable reliance; written agreements vitiate claim. |
| Duress | Termination of deed withheld coercively; duress by termination fee. | Threat to exercise a legal right cannot constitute duress. | Count Three dismissed; no reduction for economic duress. |
| Overcharges misrepresentation | Fixed rate appeared at market rate, causing overcharges. | Market rate under swap not proven; no misrepresentation of interdealer rate. | Counts Four–Five dismissed; insufficient plausible allegation of market-rate offer. |
| Fiduciary duty/Constructive fraud | Lender owed fiduciary duties in swap/loan. | Arms-length lender-borrower relationship typically lacks fiduciary duties. | Counts Six–Seven dismissed; no fiduciary relationship pleaded. |
| Rescission or reform for frustration, mutual mistake, unsuitability | LIBOR depreciation/crisis frustrated purpose; mutual mistake; unsuitability. | Frustration/mistake not established; agreement terms contemplated fixed/market spreads; no unsuitability. | Counts Nine–Ten dismissed; no entitlement to rescission or reformation. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading plausibility standard)
- Forbis v. Neal, 649 S.E.2d 382 (N.C. 2007) (fraud elements; justifiable reliance)
- Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250 (4th Cir. 2009) (illicit inferences rejected; standard for pleading)
- Bowman v. Penn. Life Ins. Co., 316 S.E.2d 621 (N.C. 1984) (signing contract implies knowledge of contents)
- Marcus Bros. Textiles, Inc. v. Price Waterhouse, LLP, 513 S.E.2d 320 (N.C. 1999) (justifiable reliance element analogous in fraud/negligent misrepresentation)