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O.F.I., Imports, Inc. v. General Electric Capital Corp.

United States District Court, S.D. New York

December 29, 2017

O.F.I. IMPORTS INC., a California corporation, Plaintiff,
v.
GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation; and DOES 1-20, inclusive, Defendants.

          OPINION AND ORDER

          VALERIE CAPRONI, United States District Judge

         This is plaintiff O.F.I. Imports, Inc.'s (“OFI”) second motion for leave to amend and third attempt at pleading a plausible claim. OFI alleged initially that the defendants, General Electric Capital Corporation and twenty unnamed individuals acting as its agents (collectively “GE Capital”), fraudulently induced OFI to overpay for the assets of Contessa Premium Foods, Inc. (“Contessa”). The Court dismissed those claims on September 26, 2016, Dkt. 60, and dismissed them with prejudice on July 20, 2017, Dkt. 69. Shifting theories, OFI now alleges that GE Capital breached the terms of the credit agreement used to finance the Contessa transaction by refusing to release its lien on OFI's assets. The Court previously dismissed these claims without prejudice on July 20, 2017. Dkt. 69. Before the Court is OFI's motion for leave to amend and file its proposed third amended complaint. Dkts. 70, 74. For the reasons that follow, the Court finds that leave to amend would be futile. Accordingly, OFI's motion is DENIED. This case is DISMISSED WITH PREJUDICE, and the Clerk of the Court is directed to enter judgment in favor of GE Capital.

         BACKGROUND

         The backstory to OFI's acquisition of the Contessa assets is discussed at length in the Court's September 26, 2016 opinion, see O.F.I. Imports, Inc. v. Gen. Elec. Capital Corp., No. 15-CV-7231 (VEC), 2016 WL 5376208 (S.D.N.Y. Sept. 26, 2016) (“OFI I”), and the Court's July 20, 2017 opinion, see O.F.I. Imports, Inc. v. Gen. Elec. Capital Corp., No. 15-CV-7231 (VEC), 2017 WL 3084901 (S.D.N.Y. July 20, 2017) (“OFI II”). The Court assumes familiarity with the facts and only discusses those facts relevant to OFI's motion for leave to amend.[1]

         OFI purchased nearly all of Contessa's assets on May 19, 2014. Proposed Third Am. Compl. (the “PTAC”) (Dkt. 70 Ex. 1) ¶ 10. GE Capital provided financing for the transaction through a revolving credit facility. PTAC ¶ 11. In order to secure the loan, GE Capital took a lien on substantially all of OFI's assets. PTAC ¶ 12.

         After this litigation began, on May 4, 2016, OFI repaid the balance of the loans to zero. PTAC ¶ 15. OFI then demanded that GE Capital release its liens. PTAC ¶ 17. According to OFI, “[d]espite having been paid in full and despite the stated requirements of the Credit Agreement, GE Capital refused to release its lien[s].” PTAC ¶ 18. Section 8.10(b) of the credit agreement (Dkt. 30 Ex. 1) (the “Credit Agreement”)[2] governs GE Capital's obligation to release its liens. There are four conditions precedent to a release of GE Capital's liens:

(A) termination of the Revolving Loan Commitments, (B) payment and satisfaction in full of all Loans, . . . and all other Obligations under the Loan Documents . . ., (C) deposit of cash collateral with respect to all contingent Obligations . . . (excluding contingent Obligations . . . as to which no claim has been asserted) and (D) to the extent requested by Agent, receipt by Agent and the Secured Parties of liability releases from the Credit Parties each in form and substance acceptable to agent.

Credit Agmt. § 8.10(b)(iii).

         In OFI II, the Court explained that OFI's proposed second amended complaint did not plausibly allege satisfaction of each of these conditions precedent. See OFI II, 2017 WL 3084901, at *5. “At most” the second proposed amended complaint “plausibly alleged the occurrence of the first two conditions [precedent]” because the Revolving Loan Commitments had terminated in accordance with the Credit Agreement on May 21, 2017, and OFI had repaid the outstanding loans. Id. at *6. The proposed second amended complaint did not, however, allege plausibly that OFI had provided a release to GE Capital “in form and substance acceptable to [GE Capital]” or that OFI had deposited cash collateral in respect of all contingent obligations. Id.

         The PTAC attempts to cure those deficiencies. According to OFI, the Revolving Loan Commitments were terminated when OFI repaid the outstanding loans. PTAC ¶ 20(A). For the same reason, according to OFI, there were no outstanding obligations under the Credit Agreement as of May 4, 2016. PTAC ¶ 20(B). OFI was not required to post any cash collateral to cover contingent obligations because, according to OFI, “there were [no] contingent obligations that required any deposit.” PTAC ¶ 20(C). And, OFI alleges that it was excused from providing GE Capital with a release because GE Capital “required [OFI] to sign a release that would have released GE [Capital] from all of the wrong doing as was alleged in the original complaint, the first amended complaint and the proposed second amended complaint.” PTAC ¶ 20(D). According to OFI, “GE [Capital] may not insist upon performance of a condition precedent when its non-performance has been caused by the [sic] GE [Capital] itself.” PTAC ¶ 20(D).

         GE Capital opposes OFI's motion for leave to amend. Opp'n (Dkt. 77).

         DISCUSSION

         Rule 15(a) of the Federal Rules of Civil Procedure provides that “[t]he court should freely give leave” to a party to amend its complaint “when justice so requires.” Fed.R.Civ.P. 15(a)(2). “Leave may be denied ‘for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party.'” TechnoMarine SA v. Giftports, Inc., 758 F.3d 493, 505 (2d Cir. 2014) (quoting McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007) (additional citations omitted)). “A proposed amendment to a complaint is futile when it ‘could not withstand a motion to dismiss.'” Balintulo v. Ford Motor Co., 796 F.3d 160, 164-65 (2d Cir. 2015) (quoting Lucente v. IBM Corp., 310 F.3d 243, 258 (2d Cir. 2002)). To survive a motion to dismiss for failure to state a claim upon which relief can be granted, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court must also accept as true all factual allegations contained within the complaint; this tenet “is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678.

         The PTAC does not plausibly allege satisfaction of each of the four conditions precedent to GE Capital's obligation to release its liens under Section 8.8(b). Although OFI extinguished the balance of Loans under the Credit Agreement as of May 4, 2016, the “Revolving Loan Commitments” did not terminate until the Credit Agreement terminated on May 21, 2017. Assuming that as of that date OFI had satisfied two of the four conditions precedent to a release - termination of the ...


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