Viridis Corporation v. TCA Global Credit Master Fund, LP
17-11237
| 11th Cir. | Jan 3, 2018Background
- Borrowers (Viridis, Beck-Ford, LCTI, Ideal, C&I, SEP, WKMS, and Jarnagin) entered multiple credit agreements with TCA Global (Global) beginning with a $10M First Credit Agreement (FCA) and later executed a Second Credit Agreement (SCA) plus related Repayment Agreement; each later agreement contained broad release and waiver provisions.
- Disputes arose from alleged withholding/misuse of lockbox funds, refusal to cooperate with refinancing, threatened/default notices, and alleged false statements about Global’s ability/willingness to fund.
- After the SCA closing (Dec. 31, 2014), Borrowers alleged continued post-closing misconduct (withholding lockbox funds, obstructing payoff/refinancing).
- Borrowers sued asserting breach of contract (FCA and SCA), fraudulent misrepresentation, tortious interference, usury, FDUTPA, civil conspiracy, and RICO (wire fraud and collecting unlawful/usurious debts).
- The district court dismissed the Third Amended Complaint (TAC) in full, reasoning the SCA’s release/waiver barred the claims; the Eleventh Circuit affirmed in part, reversed in part, and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of SCA/Repayment Agreement releases — do they bar pre-SCA claims (e.g., breach of FCA)? | Releases are narrower and do not cover FCA claims; wording differences matter. | Releases are broad, cover all claims "from the beginning of time through the Effective Date," including claims arising from Loan Documents. | Court: Release barred claims that accrued before SCA (Counts One and Five); dismissal affirmed. |
| Enforceability of releases as to fraud — can contractual releases waive fraudulent-misrepresentation claims? | Releases bar claims generally. | Fraud claims are waivable by contract. | Court: Releases do not preclude claims for intentional fraud; Counts Two and Four (fraud) reversed/allowed to proceed. |
| Usury claims & choice-of-law — can Florida usury law override Nevada choice-of-law and prevent release? | Florida has strong public policy against usury; usury claims cannot be released; Nevada choice-of-law was inserted by Global to avoid Florida law. | Choice-of-law clauses are presumptively enforceable; Florida usury protections do not establish a "strong public policy" sufficient to defeat the clause; usury can be waived in Florida. | Court: Choice-of-law enforced; usury-based claims were released and dismissal of Counts Six and Seven affirmed. |
| RICO (wire fraud and unlawful debt) — do RICO claims survive the releases and pleadings? | RICO based on both usury and wire fraud and conspiracy to prevent refinancing; some alleged wire fraud occurred after SCA. | RICO grounded on pre-SCA acts is released; usury-based predicate implausible. | Court: RICO claims premised on usury dismissed; RICO/wire-fraud allegations that accuse post-SCA racketeering conduct survive and dismissal reversed as to those portions. |
| Breach of SCA and implied covenant (good faith) — did plaintiffs plausibly plead breach/bad faith under the SCA? | Beckford alleged Global failed to transfer Net Amounts from the lockbox and improperly prevented payoffs/refinancing; alleges post-SCA misconduct. | SCA gave lender discretion over lockbox transfers and required conditions precedent; plaintiffs failed to plead satisfaction of conditions. | Court: District court applied Florida law without choice-of-law analysis; under Nevada law an independent bad-faith claim may survive. Dismissal reversed as to Count Three; remand for choice-of-law and further analysis. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for Rule 12(b)(6) dismissals)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (Twombly pleading standard for plausible claims)
- Quality Auto Painting Ctr. of Roselle, Inc. v. State Farm Indem. Co., 870 F.3d 1262 (11th Cir. 2017) (standard of review for dismissal de novo; accept factual allegations and infer in plaintiff’s favor)
- Spanish Broad. Sys. of Fla., Inc. v. Clear Channel Commc'ns., Inc., 376 F.3d 1065 (11th Cir. 2004) (pleading and dismissal principles)
- Gunn Plumbing, Inc. v. Dania Bank, 252 So. 2d 1 (Fla. 1971) (Florida permits waiver of usury defenses by stipulation/release)
- Oceanic Villas, Inc. v. Godson, 4 So. 2d 689 (Fla. 1941) (contract provision cannot preclude fraud claim unless the contract expressly makes it incontestable on fraud grounds)
- Hilton Hotels Corp. v. Butch Lewis Prods., Inc., 862 P.2d 1207 (Nev. 1993) (Nevada recognizes potential independent bad-faith claim for covenant of good faith and fair dealing)
- Clark v. Columbia/HCA Info. Servs., Inc., 25 P.3d 215 (Nev. 2001) (release terms enforceable as written; releases generally cover claims matured at signing)