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MEADOWLANDS INVESTMENTS, LLC v. CIBC WORLD MARKETS CORP.

September 22, 2005.

MEADOWLANDS INVESTMENTS, LLC, Plaintiff,
v.
CIBC WORLD MARKETS CORP., et al., Defendants.



The opinion of the court was delivered by: DEBORAH BATTS, District Judge

MEMORANDUM & ORDER

Before the Court is Defendant CIBC World Markets Corp.'s ("CIBC") Motion to Dismiss the above action. Defendant CIBC moves to dismiss the breach of contract claim because Plaintiff's conclusory allegations of breach of contract are contradicted by the facts pleaded in the Complaint. Defendant CIBC also moves to dismiss the fraud claims for failure to state a claim pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure, for failure to allege any exceptions to the rule that an alleged breach of contract does not give rise to tort liability, and for being duplicative. Plaintiff states that it has pleaded all claims sufficiently to meet the requirements set forth in the Federal Rules of Civil Procedure, and furthermore, that Defendant's Motion is premature as there has been no discovery in this matter.

For the reasons that follow, Defendant's Motion is GRANTED and the claims against Defendant CIBC are DISMISSED. Plaintiff is GRANTED leave to replead the New Jersey Consumer Fraud Act cause of action against Defendant CIBC.

  I. BACKGROUND

  Plaintiff Meadowlands Investments, LLC ("Meadowlands") is a New Jersey Limited Liability Company with offices in Paramus, New Jersey. Defendant CIBC is a corporation in the business of providing commercial loans. CIBC is incorporated in Delaware and its principal place of business is in New York. (Compl. ¶¶ 1, 3.)

  Plaintiff owns property located at 110 Meadowlands Parkway, Secaucus, New Jersey ("Secaucus Property"). In August, 2003, Plaintiff was allegedly approached by L.J. Melody & Company ("L.J. Melody"), a named defendant in this matter,*fn1 by its agent, James F. Gunning, Jr. ("Gunning"). Gunning suggested a possible refinance of Plaintiff's Secaucus Property. According to Plaintiff, L.J. Melody "was aware that a possible refinance of the property would be difficult based on the financial make-up and status of the telecommunications companies which were tenants in the building." (Id. ¶ 9.)

  Defendant L.J. Melody, through Gunning, "advised" Plaintiff that "it had a lender that was ready, willing and able to refinance Plaintiff's property." (Id. ¶ 10.) That lender was Defendant CIBC. (Id. ¶ 11.) Defendants L.J. Melody and CIBC "advised" Plaintiff that CIBC would refinance the Secaucus Property for $9,750,000.00, with $750,000.00 of that sum to be held in an escrow account under the control of CIBC, subject to certain terms and conditions. L.J. Melody would receive a commission on the transaction. (Id. ¶¶ 12-13.)

  Plaintiff states that prior to applying for the refinancing loan, it "fully advised Defendants Melody and CIBC of the status of Plaintiff's current finances, as well as the current status of all leases and all other relevant information regarding the subject property."*fn2 (Id. ¶ 14.) L.J. Melody and CIBC were aware of the financial issues of the tenants of the Secaucus Property and had been advised by Plaintiff that one particular tenant, XO Communications, Inc. ("XO") was undergoing financial reorganization, and hence, it was not known whether XO would be renewing its lease which was set to expire on December 31, 2004. (Id. ¶¶ 15-16.)

  Both L.J. Melody and CIBC were fully aware of the financial condition of Plaintiff and its tenants at the Secaucus Property. (Id.) L.J. Melody, with this knowledge, "advised" Plaintiff that the refinance was a "done deal" and that "CIBC would process the loan expeditiously." (Id. ¶ 19.) Based on representations made by CIBC and L.J. Melody, Plaintiff began the loan application and submitted an Application Letter to CIBC on September 2, 2003 ("Application Letter"), along with a "Good Faith" application fee of $25,000.00. (Id. ¶¶ 20-21.)

  The Application Letter provides that CIBC "warrants and represents that it will act in Good Faith at all times in the processing of Applicant's Application." (Id. ¶ 22.) The Application Letter further provides that
Applicant understands and agrees that Lender is not obligated to make the Loans contemplated hereby unless and until (A) Lender has accepted this Application by obtaining Lender's Loan Committee approval and issuance of a separate commitment letter (the "Commitment"), (B) such Commitment is accepted by Applicant, and (C) the Closing Deposit to be paid by Applicant is paid. . . . Applicant acknowledges and agrees that . . . this Application is not an offer, a contract, a binder, a memorandum of contract, a commitment or a promise by Lender or CIBC World Markets to make the Loan, or an agreement to issue any such commitment. Lender may, at any time prior to the issuance of a Commitment, reject this Application and have no further obligations thereunder.
(Def.'s Notice of Motion at Ex. B, p. 2.) In addition, the Application Letter states that "Any amounts remaining from the Good Faith Deposit after all Due Diligence Expenses and Legal Expenses have been paid shall be retained by Lender as a fee in consideration for its evaluation and processing of this Application." (Id, p. 2-3.) The Application Letter is signed by Anil Bansal, "Managing Member" of Meadowlands, and dated September 2, 2003. (Id.)

  Plaintiff began the due diligence process and complied with all the requirements of the Application. Plaintiff maintained constant contact with CIBC and CIBC's review counsel Winston & Strawn, LLP, in order to "assure that Plaintiff was in full compliance with CIBC's requirements." (Id. ¶ 24.) This constant contact with CIBC and CIBC's review counsel was "throughout the application process" and included communications via telephone, electronic mail, standard mail, overnight deliveries and facsimiles. (Id. ¶ 25.) According to Plaintiff, the correspondence was often "several times each day." Whenever CIBC requested additional documentation or information, Plaintiff provided it "immediately." (Id.) Plaintiff never withheld any information, nor delayed in providing the information; Defendant CIBC requested information continuously. On December 18, 2003, CIBC denied Plaintiff's application.

  Plaintiff filed this action against Defendants CIBC, L.J. Melody, John Does 1-20, and ABC Corporation*fn3 on September 14, 2004. Plaintiff brings six claims against Defendant CIBC. Count One alleges fraudulent inducement to apply for the loan by Defendants CIBC and L.J. Melody. Count Two alleges that Defendant CIBC breached the express and implied contract between CIBC and Plaintiff. Count Three alleges violations by Defendants of regulations under the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-1, et seq. Count Four alleges common law fraud by Defendants, specifically that Defendants used deception and made false promises and representations to Plaintiff, which Plaintiff relied upon in applying for the loan, and that Defendants then denied the application in bad faith and failed to return the deposit. Count Five also alleges false representations by Defendants upon which Plaintiff relied, reasonably believing those representations to be true and unaware of their falsity. Count Six again alleges fraud and false representations and inducements by Defendants as well as unconscionable commercial practice and deception, resulting in substantial economic damage to Plaintiff, who reasonably relying on Defendant's representations, made commitments to purchase additional property with the proceeds of the refinance loan, prior to the approval of the loan. (Id. ¶¶ 30-68.)

  Defendant CIBC filed its Motion to Dismiss the Complaint on December 10, 2004.

  II. DISCUSSION

  Defendant CIBC moves to dismiss the breach of contract claim for failure to state a claim because Plaintiff has made factual allegations that contradict its conclusory allegations of breach of contract. Defendant CIBC also moves to dismiss the fraud claims for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) and 9(b), for failure to allege any exceptions to the rule that an alleged breach of contract does not give rise to tort liability, and because the fraud claims are duplicative.

  In diversity cases, New York substantive law applies to claims arising out of common law and federal law governs procedural matters. See Kaufman v. Guest Capital, LLC, No. 03 Civ. 1509, 2005 WL 167602, at *6, fn.7 (S.D.N.Y. Jan. 25, 2005) (citing Hanna v. Plumer, 380 U.S. 460 (1986)); see also Philips Credit Corp. v. Regent Health Group, 953 F.Supp. 482, 501 (S.D.N.Y. 1997) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817 (1938)); deBruyne v. ...


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