The Huntington National Bank v. Hard Rock Exploration, Inc.
1:16-cv-00048
N.D.W. Va.May 16, 2017Background
- Huntington National Bank sued Hard Rock entities and individual principals for unpaid loans, swap termination charges, and a forbearance fee, seeking judgment and fees.
- Defendants filed counterclaims alleging promissory fraud, interference with prospective business advantage, breach of implied covenant of good faith and fair dealing, breach of contract, economic duress, breach of fiduciary duty, and related relief.
- Huntington moved to dismiss the counterclaims, arguing the Forbearance Agreement released all claims and that the counterclaims were inadequately pleaded.
- Defendants responded that the Forbearance Agreement may be unenforceable due to coercive or wrongful conduct and that their counterclaims plead sufficient facts to survive dismissal.
- The court treated factual disputes (including enforceability of the Forbearance Agreement) as matters for discovery and evaluated only whether the counterclaims were plausibly pleaded.
- The court denied the motion to dismiss, finding the counterclaims adequately pleaded under West Virginia law and that the Forbearance Agreement’s enforceability could not be decided at the motion-to-dismiss stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of the Forbearance Agreement / release | Forbearance Agreement is enforceable and bars all counterclaims | Agreement may be voidable due to unlawful threats, wrongful/oppressive conduct and economic duress | Court declined to decide enforceability at 12(b)(6); allegations that it may be unenforceable survive to discovery |
| Fraud / promissory fraud | Counterclaim insufficiently pleaded | Alleged promises were knowingly false to induce assent to loan changes | Court found promissory fraud adequately pleaded (intent to deceive alleged) |
| Tortious interference with prospective business advantage | Insufficient specificity to show interference | Alleged wrongful, malicious interference with financing opportunities causing damages | Court held interference claim plausibly pleaded |
| Breach of fiduciary duty | No fiduciary duty exists between lender and borrower | Special relationship alleged based on longstanding dealings and lender’s representations | Court held allegations of a special relationship sufficient to survive dismissal |
| Breach of implied covenant / breach of contract / economic duress | Claims duplicative or inadequately pleaded | Alleged breach of contractual cure rights, omissions, and coercion forcing agreement | Court found claims adequately pleaded under West Virginia law (economic duress elements alleged) |
Key Cases Cited
- Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250 (4th Cir. 2009) (pleading standard and treatment of well-pled facts)
- Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) (legal conclusions not entitled to assumption of truth)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Giarratano v. Johnson, 521 F.3d 298 (4th Cir. 2008) (facial plausibility required to survive dismissal)
- Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599 (4th Cir. 2009) (court will not accept unwarranted inferences)
- Berardi v. Meadowbrook Mall Co., 572 S.E.2d 900 (W. Va. 2002) (wrongful/oppressive conduct can void a transaction)
- Machinery Hauling, Inc. v. Steel of W. Va., 384 S.E.2d 139 (W. Va. 1989) (recognition of economic duress doctrine)
- Evans v. United Bank, Inc., 775 S.E.2d 500 (W. Va. 2015) (implied covenant claim exists alongside breach of contract)
- White v. AAMG Constr. Lending Ctr., 700 S.E.2d 791 (W. Va. 2010) (lender breach of contract and borrower’s remedies)