467 F.3d 466 | 5th Cir. | 2006
Before J ONES , Chief Judge, and I.
S MITH and S TEWART , Circuit Judges. Because this case was resolved on motion to dismiss, the allegations in the complaint J ERRY E. S MITH , Circuit Judge: must be liberally construed in favor of the plaintiff, and all facts pleaded in the complaint EPCO Carbon Dioxide Products, Inc. must be taken as true. Lowery v. Tex. A&M (“EPCO”), appeals the dismissal of its breach Univ. Sys. , 117 F.3d 242, 247 (5th Cir. 1997). of contract, abuse of rights, and bad faith The facts discussed below utilize that standard. claims against JP Morgan Chase Bank, NA (“Chase”). Because EPCO’s complaint pleads A. sufficient allegations to state a claim on which EPCO, a liquid carbon dioxide producer, relief can be granted, we reverse and remand. acquires sites and manufacturing equipment for its production process through financing and did not intend to renew the letters of cred- from banking institutions. Chase provided fin- it on two EPCO facilities. Chase was aware ancing for three EPCO facilities, most recently that a failure to renew letters of credit for EPCO’s Eddyville, Iowa, facility. these facilities would cause defaults on the
bonds for those facilities as well as cross- In December 2002, EPCO and Chase made defaults with other lenders. a financing agreement for the Eddyville facil- ity, providing for a “lower floater” corporate EPCO received a letter from Chase indicat- note financing structure by which Chase would ing that the only circumstance in which Chase issue an irrevocable direct pay letter of credit would renew the letters of credit was if EPCO for $3,350,000 that would support floating- entered into a forbearance agreement in which rate option notes issued by EPCO. [1] EPCO EPCO would admit certain technical defaults, also executed Security Agreements in which it provide additional collateral, and pay addition- granted Chase a security interest in various al fees and higher interest rates. EPCO signed collateral relating to the Eddyville facility. that agreement. Some financing documents contemplated a subsequent issuance of notes up to an aggre- Following a few additional months of ne- gate amount of $7 million relating to the ac- gotiations, in May 2004 Chase made a written quisition of future projects, including a facility offer by letter to EPCO to restructure the in- in Monroe, Wisconsin. debtedness associated with EPCO’s facilities
and extend the Eddyville letter of credit In February 2003, Chase requested that through December 1, 2005. EPCO accepted EPCO grant a security interest in additional that offer on the terms set forth by Chase. collateral in connection with discussions re- Notwithstanding EPCO’s acceptance, Chase garding the $7 million loan package. EPCO failed to comply with the terms of the May informed Chase that its plans for additional 2004 agreement and has made repeated threats projects, including the Monroe facility, were to put EPCO in default and impose even more on hold and that it would not provide addi- onerous conditions. tional collateral. Chase, however, insisted on the additional collateral. In September 2004 Chase informed EPCO
that it would not renew the letter of credit un- In March 2003, Chase informed EPCO that less EPCO paid increased fees to Chase, and it wished to terminate the banking relationship paid all attorney fees incurred by Chase during the negotiations since March 2003. Should Chase fail to renew the letters of credit, EPCO will suffer significant financial losses and ir- [1] “Lower Floater” financing is a security struc- reparable damage to its reputation. ture in which notes are underwritten and sold in the public finance market to investors who will rely on
B.
the letter of credit as a source of repayment. The EPCO sued Chase in state court seeking trustee of the letter of credit, Chase, will make specific performance of the May 2004 agree- payments to the holders of the notes and can then ment, damages for breach of contract and seek reimbursement from the debtor, EPCO, abuse of rights, and an injunction to prevent pursuant to the terms of a Reimbursement Agreement signed by the parties. Chase from failing to renew the letters of cred- Although the magistrate judge based his de- it. Chase removed the case to federal court cision solely on the pleadings, he included a based on diversity of citizenship and moved to footnote describing documents Chase had dismiss under Federal Rule of Civil Procedure attached to its reply memorandum in support 12(b)(6) for failure to state a claim. of the motion to dismiss. Id. In footnote 4 he
discussed several email documents submitted Chase’s principal contention in its motion by Chase that indicated that the May 2004 to dismiss was that all of EPCO’s claims stem agreement required “execution of definitive from an alleged breach of the May 2004 agree- documentation” to be accepted and that EPCO ment. Under Louisiana’s Credit Agreement had initially rejected that offer by email. Id. Statute, all actions based on a credit agreement The district court accepted the magistrate are barred unless the agreement is, inter alia , judge’s recommendation, with the exception of in writing and signed by the creditor and footnote 4, and dismissed the claims. debtor. See L A . R EV .S TAT . 6:1121 et seq. ; Jesco Constr. Corp. v. Nationsbank Corp. , II. 830 So. 2d 989, 991-992 (La. 2002). Because We review a dismissal under rule 12(b)(6) EPCO did not allege that the May 2004 de novo . See Bombardier Aerospace Employ- agreement was in writing and signed by both ee Welfare Benefits Plan v. Ferrer, Poirot & parties, Chase claimed that EPCO’s allegations Wansbrough , 354 F.3d 348, 351 (5th Cir. were insufficient on their face to state a claim. 2003). We apply the same standard as does
the district court: A claim will not be dis- The magistrate judge, in his report and rec- missed unless the plaintiff cannot prove any set ommendation, concluded that to bring a claim of facts in support of its claim that would for breach of a credit agreement, EPCO was entitle it to relief. Id. required to plead either “the existence of a written agreement ‘that is signed by the cred- A. itor and the debtor,’” or that “(1) EPCO ac- The Louisiana Credit Agreement Statute cepted the offer by email, and (2) Chase operates as a “statute of frauds” for the credit agreed to conduct business by electronic industry. King, 885 So. 2d at 546. Actions means.” EPCO Carbondioxide Prods. v. JP brought by debtors based on credit agreements Morgan Chase Bank, NA , 2005 WL 1630096 cannot be maintained unless “the agreement is (W.D. La. 2005) . Because EPCO had failed in writing, expresses consideration, sets forth to meet these pleading requirements, EPCO’s the relevant terms and conditions, and is “conclusory” allegation that it had “accepted signed by the creditor and the debtor.” L A . the offer” was insufficient. Id . For the abuse R EV . S TAT . § 6:1122 (2005). The purpose of of right claim, the magistrate judge concluded the statute is “to prevent potential borrowers that EPCO was seeking to “create an implied from bringing claims against lenders based agreement obligating Chase to renew the loans upon oral agreements;” its effect is to bar “all or letters of credit beyond their maturity actions for damages arising from oral credit dates,” a cause of action precluded by the agreements, regardless of the legal theory of Louisiana Credit Agreement Statute and recovery asserted.” Jesco , 830 So. 2d at 992. Louisiana jurisprudence. Id. The statute has also been held to reach actions
based on implied agreements from a course of dealings or a “previous business relationship.” 12(b)(6) may be appropriate based on a suc- King , 885 So. 2d at 548. cessful affirmative defense, that defense must
appear on the face of the complaint. [3] The Louisiana has also enacted the Uniform Statute of Frauds has traditionally been con- Electronic Transactions Act, L A . R EV . sidered an affirmative defense. See F ED . R. S TAT . § 9:2601 et seq. (2005). This statute C IV . P. 8(c); Automated Med. Lab., Inc. v. allows an electronic signature to satisfy the Armour Pharm. Co. , 629 F.2d 1118 (5th Cir. signature requirement for most legal docu- 1980). ments. L A . R EV . S TAT . § 9:2607. The Act applies only to transactions between parties EPCO pleaded that a written offer was ex- who have “agreed to conduct transactions by tended to EPCO by Chase on the date of the electronic means.” L A . R EV . S TAT . § 9:2605- May 2004 agreement. EPCO also pleaded that (B)(1). it accepted this offer. Under the liberal notice-
pleading standard of rule 8, this was a suf- Taken together, these two statutes create a ficient pleading to provide notice to Chase of the factual basis for EPCO’s claim. [4] significant evidentiary burden for EPCO. Because it brings an action on a credit agree- ment, EPCO must prove, as an element of its Chase argues, and the magistrate judge claim, that there was a written credit agree- agreed, that EPCO should be required to plead ment signed by both parties. If EPCO asserts either that the May 2004 agreement was that it submitted its signature electronically, it must prove that the parties agreed to conduct [2] (...continued) transactions by electronic means. 300, 312-14 (applying “no set of facts that would entitle him to relief” standard to review of a rule
It is a well-known principle of federal law 12(b)(6) motion for dismissal based on the Louisi- that federal procedure requires only notice ana Credit Agreement Statute). The traditional pleading, “a short and plain statement of the Fifth Circuit rule is that “a complaint is sufficient claim showing that the pleader is entitled to if it satisfies the Federal Rules, even though it relief.” [2] Although dismissal under rule would be subject to demurrer in a state court for failure to set forth facts sufficient to constitute a cause of action.” Thompson v. Allstate Ins. Co. , [2] F ED . R. C IV . P. 8(a)(2); Hoshman v. Esso 476 F.2d 746, 749 (5th Cir. 1973). We see no rea- Stand. Oil Co. , 263 F.2d 499, 501 (5th Cir. 1959). son to depart from this general rule in the instant “A claimant does not have to set out in detail the context. facts on which the claim for relief is based, but must provide a statement sufficient to put the op- [3] 2 M OORE , supra , § 12.34[4][b], at 12-74 (cit- posing party on notice of the claim.” 2 J AMES W. ing Kansa Reins. Co. v. Congressional Mortgage M OORE ET AL ., M OORE ’ S F EDERAL P RACTICE Corp. , 20 F.3d 1362, 1366 (5th Cir. 1994)). § 8.04[1][a], at 8-22 (Matthew Bender 3d ed. 2006). Although in some statutory contexts state [4] See Gen. Elec. Capital Corp. v. Posey , 415 statutes have modified federal pleading require- F.3d 391, 396, 398 (5th Cir. 2005) (describing the ments, see id. , this court has not construed the “low bar” set out by rule 8a with the example de- Louisiana Credit Agreement Statute as modifying scribed as sufficient by form 9, “the simple state- the rule 8 standard. Cf. In Re Dengel , 340 F.3d ment, ‘[D]efendant negligently drove a motor ve-
(continued...) hicle against plaintiff . . . .’”). signed by the parties or that the parties agreed EPCO has not conceded that its claim is to transact by electronic means. This argu- based on an oral representation of Chase or on ment misunderstands the rule 8 requirement. an unsigned agreement. Consistent with its “Parsing the allegations into elements has nev- pleadings, EPCO may be able to show that its er been required.” [5] EPCO’s pleadings need
acceptance was in the form necessary to satisfy not identify every element of its claim, partic- the Credit Agreement Statute, either by ularly where the contested elements relate to submitting proof that its agreement with Chase the affirmative defense of the statute of frauds. was in a written, signed document or proof
that it submitted its acceptance of Chase’s Although courts in this circuit have previ- offer electronically and that the two parties ously dismissed claims under rule 12(b)(6) in had agreed to conduct business electronically. reliance on the Louisiana Credit Agreement Neither of these factual scenarios is foreclosed Statute, in those cases the non-moving party by the face of EPCO’s pleadings, so dismissal at this early stage was improper. [6] either pleaded or conceded that its claim was based on an oral or unsigned agreement. See Dengel , 340 F.3d at 311-14; Bonvillain v. B. U.S. , 1999 WL 1072539, at *3 (E.D. La. Although we have the authority to grant 1999); Whitney Nat’l Bank v. Stack , 1991 WL judgment in favor of a party who did not move 255376, at *1 (E.D. La. 1991). Instructive in for summary judgment in the district court, we this regard is the analysis in Dengel . should do so only where “(1) there is no gen-
uine issue of material fact and (2) the opposing There, the plaintiff brought a third-party party has had a full opportunity to (a) brief the counterclaim against Bank One, alleging legal issues and (b) develop a record.” Rob- breach of a loan commitment. Although plain- inson v. Aetna Life Ins. Co. , 443 F.3d 389, tiff did not plead a written, signed credit 396 (5th Cir. 2006). Chase submitted addi- agreement in his counterclaim, we affirmed a tional evidentiary material through an affidavit summary judgment, relying on the fact that attached to its reply memorandum in support “the alleged credit agreement attached to the of its motion to dismiss. EPCO did not have third party claim is not signed by Dengel and a chance to respond to that material or to chal-
lenge it by submitting contrary evidence. [7] We his wife as required by La. R.S. 6:1122.” Dengel , 340 F.3d at 313. therefore deem it prudent to remand these is- sues to the district court, which may require full briefing or receive additional evidence.
The summary judgment is REVERSED, and this matter is REMANDED for further proceedings.
NOTES
[6] We express no opinion as to the sufficiency of any additional showing that EPCO may be able to
[5] Posey , 415 F.2d at 396 n.5. “Indeed, the mere make or as to whether, in the event of an inade- fact that allegations can be characterized as quate showing, EPCO would be subject to sanc- ‘conclusional’ will not, alone, suffice to make them tions. insufficient.” Id. at 397 n.6. “[T]he test is whether
[7] In addition, the plain text of rule 56 creates a the complaint ‘outline[s] or adumbrate[s]’ a violation of the statute or constitutional provision notice requirement for summary judgment. F ED .R. on which the plaintiff relies . . . and connects the C IV . P. 56(c) (“The motion shall be served at least violation to the named defendants.” 2 M OORE , 10 days before the time fixed for the hearing.”). supra , § 8.04[1][a], at 8-24 (quoting Brownlee v. Although our circuit has not followed our sister Conine , 957 F.2d 353, 354 (7th Cir. 1992)) circuits by implying a hearing requirement, see (brackets and ellipses in original). (continued...)
[7] (...continued) Jackson v. Widnall , 99 F.3d 710, 713 (5th Cir. 1996), “if there is no hearing, the adverse party must have at least 10 days before the court makes a ruling to respond to the motion for summary judgment,” 2 M OORE , supra , § 56.10[2][a], at 56-49.